Earnings Call Transcript - NBIX Q3 2025

Operator, Operator

Good day, everyone, and welcome to today's Neurocrine Biosciences Third Quarter 2025 Results Call. Please note, this call is being recorded. I will be available if you need any assistance. It is now my pleasure to turn the conference over to Vice President of Investor Relations, Todd Tushla.

Todd Tushla, Vice President of Investor Relations

Hi, everybody, and a very pleasant good afternoon to you wherever you may be. Welcome to Neurocrine Biosciences Third Quarter 2025 Earnings Call. I'm joined today by Kyle Gano, Chief Executive Officer; Matt Abernethy, Chief Financial Officer; Eric Benevich, Chief Commercial Officer; and Sanjay Keswani, Chief Medical Officer. During our call, we will be making forward-looking statements. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to review the risk factors discussed in our latest SEC filings. After prepared remarks and as is our standard practice, we will try to address all your questions. With that, I turn the call over to Kyle.

Kyle Gano, CEO

Thank you, Todd. Good afternoon, everyone. Our third quarter results reflect Neurocrine's exceptional execution and the strength of our enterprise-wide momentum as we continue to deliver across our commercial, clinical and operational objectives. From a commercial perspective, for INGREZZA, the recent investments to expand our sales force and improve patient access drove yet another record quarter for both new patient starts and total prescriptions. Highlighting the persistent unmet need for patients with tardive dyskinesia and Huntington's chorea. With CRENESSITY, the strong launch highlights its role as a first-in-class therapy, redefining the standard of care for patients with classical congenital adrenal hyperplasia or CAH. While there is still much to learn, we are encouraged by the early response from the CAH community and the potential to make a lasting impact for patients. Momentum for both INGREZZA and CRENESSITY is strong and we believe continued targeted investments in these commercial assets will accelerate growth into 2026 and beyond. In our clinical portfolio, I am pleased with the study enrollment progress in our Phase III studies of osavampator in major depressive disorder in direclidine in schizophrenia. We remain on track to meet enrollment objectives for the year. Beyond these late-stage programs, we continue to advance a robust early and mid-stage pipeline expanding through high-quality preclinical programs emerging from Neurocrine's internal discovery efforts. To this end, I'm also happy to report that we are on track to achieve our R&D productivity goals for the year, specifically 4 new Phase I study initiations and 2 new Phase II initiations. Advancing 2 potentially standard of care-changing medicines until the final phase of development, while simultaneously driving early and mid-stage innovation represents a record level of productivity for us and positions Neurocrine exceptionally well for the future. As I reflect on my more than 20 years at Neurocrine and just over 1 year as CEO, I'm deeply proud of how far we've come. Yet as we continue to evolve, I'm even more inspired by what lies ahead. Neurocrine is poised to enter a new chapter of sustained long-term growth, driven by our science, our people and our unwavering commitment to the patients we serve and investors to support our mission. With that, I'll turn the call over to Matt.

Matthew Abernethy, CFO

Thank you, Kyle, and good afternoon, everyone. The third quarter was strong across the board for Neurocrine, with $790 million in net product sales, reflecting 28% year-over-year growth. Driven by continued progress both from CRENESSITY and INGREZZA, congrats to all involved in the performance of these 2 medicines. CRENESSITY grew sequentially from $53 million in Q2 to $98 million in Q3, reflecting strong early adoption and persistency rates. In addition, 80% of dispensed prescriptions are now being reimbursed. Feedback from patients and KOLs remains quite favorable in terms of CRENESSITY's efficacy, safety and tolerability profile. We look forward to continuing to add patients to therapy and to further establishing CRENESSITY as a standard of care treatment for patients with CAH. Momentum for INGREZZA also continues to build with our third consecutive quarter of record new patient additions in Q3, resulting in net sales of $687 million. Of note, as you consider modeling Q4, the third quarter benefited from a 14th ordering week. Outside of this ordering dynamic, the combination of improved access and our sales force expansion, is resulting in double-digit TRx growth, record NRx, and market share gains through the first 9 months of the year. On the heels of this momentum and strength of the TD market, we have decided to pursue an additional sales force expansion with 3 goals in mind. First, accelerate the development of the TD market between now and 2029, strengthening our position as we navigate the potential impacts of the Inflation Reduction Act. Second is to maximize INGREZZA patient share during this window of time. And third, set the foundation of an expanded psychiatry portfolio, anticipating one or more of our late-stage clinical programs will have successful top-line data in 2027. From a financial perspective, the expanded investment in both INGREZZA and CRENESSITY will result in an SG&A expense increase of around $150 million in 2026. We will, of course, provide a fuller financial picture for Neurocrine in February next year, but I wanted to give you this insight for now. To close, our capital allocation priority is to remain intact. Number one, drive revenue growth; number two, advance our R&D programs; number three, enable business development; and number four, return capital to shareholders. Our top-line growth and financial profile of over $2.1 billion in cash is the foundation for continued investment in our internal pipeline, which will position Neurocrine for sustained growth and enable us to deliver new innovative therapies to patients with unmet needs in the years ahead. With that, I will now hand the call over to Eric Benevich, our Chief Commercial Officer. Eric?

Eric Benevich, CCO

Thanks, Matt. Q3 was another banner quarter for our brands. Our commercial and medical teams continued to deliver with a record quarter for both INGREZZA and CRENESSITY with combined net sales of $785 million. Starting with INGREZZA, performance through the first 9 months of 2025 has been exceptional, reflecting both the strong clinical profile and the continued significant unmet need for people living with tardive dyskinesia or Huntington's chorea. Past strategic investments to expand the sales force and improve access have been positive, yielding a third consecutive quarter of record new patient starts and total prescriptions. Today, of a population exceeding 800,000, we estimate only about half of those living with TD have received a diagnosis for their uncontrolled movements, and only about 10% are currently being treated with the VMAT2 inhibitor. With exclusivity out to 2038, there remains a significant organic growth opportunity ahead. Our INGREZZA prescriber base continues to expand, particularly in psychiatry, where advanced practice providers, such as nurse practitioners and physician associates now account for the majority of psychiatric patient care in the United States. As an example, our INGREZZA prescriber base is 30% larger today than it was 2 years ago at this time. In addition, TD prevalence continues to increase in conjunction with broader use of antipsychotic medications. In light of our strong momentum and the significant growth opportunity, we've made the decision to further scale up our INGREZZA sales force to meet this growing demand. Going forward, we will be expanding and restructuring our INGREZZA sales organization to create 2 dedicated teams, one combined neuropsych team and our existing Long-Term Care team. Both the Neuropsych and LTC teams will be expanded to enable us to engage more VMAT2 prescribers than ever before and deepen relationships across our current base of prescribers. Consistent with prior expansions, success will be measured by growth in new patient starts and total prescriptions, metrics, which typically show the full impact of field expansion several quarters after deployment. The expansion of the sales teams set INGREZZA up well for 2026 and beyond. Will also help position us for the anticipated launches of our next wave of investigational psychiatric medicines currently in Phase III development. Now turning to CRENESSITY. Our launch mantra of So Far, So Great, remains well deserved with Q3 net sales reaching $98 million in just the third full quarter on the market. During the third quarter, 540 new patients initiated therapy, bringing the total number of classic CAH patients on therapy since launch to more than 1,600. As we've said from the outset, this is a new market we are building, and therefore, this is a learning launch. With CRENESSITY representing the first therapy developed and approved specifically for patients with classic CAH we continue to gain important insights into prescriber behavior, patient dynamics and potential seasonality trends. We continue to see steady adoption. And while the pace of new patient starts may vary from quarter-to-quarter, the strong persistence and adherence rates observed to date give us confidence in continued volume growth going forward. In the third quarter, patient demand modestly favored the pediatric population versus adults, and skewed towards female patients. Prescriptions continue to be written by a range of endocrinology providers, including those practicing in multidisciplinary centers of excellence, pediatric endocrinologists and community-based adult endocrinologists. On the payer front, we continue to see strong reimbursement. Launch to date, 9 out of 10 people taking CRENESSITY have received approval for their insurance, and CRENESSITY is affordable with 9 out of 10 people paying $10 or less per month out of pocket, most pay 0. So far, insurance reimbursement has not been a barrier to treatment. As the first and only FDA-approved treatment specifically for classic CAH, CRENESSITY delivers a compelling combination of efficacy, safety and tolerability. Our ongoing open-label extension studies continue to generate valuable data on quality of life, long-term safety and differentiating outcomes, which will further strengthen an already robust data set. We estimate approximately 20,000 people in the U.S. live with classic CAH. Based on the very favorable receptivity from the CAH community and the opportunity to bring relief to more people with CAH, we've made the decision to also expand our CRENESSITY sales team. As I said in my opening comments, we're executing very well from a commercial perspective. Both our products are fast-growing, innovative first-in-disease medicines. Given the significant growth potential for each, it was a straightforward decision to expand both the INGREZZA and CRENESSITY sales teams. This is an investment in growth and an investment in our future. Both sales team expansions will be fully completed by the end of Q1, and we can give further color on our progress as we get into 2026. These are very exciting times here at Neurocrine as we make good on our promise to deliver brave science. So with that, I'll hand the call over to Dr. Sanjay Keswani, our Chief Medical Officer.

Sanjay Keswani, CMO

Thanks, Eric, and good afternoon to everyone. My prepared remarks for today will be brief as we remain on track for all our clinical programs. We anticipate top-line results in the fourth quarter for valbenazine in dyskinetic cerebral palsy as well as for the Phase II proof-of-concept and dose-finding study of NBI-770, that's our NR2B NAM as an adjunctive treatment in major depressive disorder. As a reminder, positive results from NBI-770 could support a confirmatory Phase II study or the initiation of a Phase III trial in MDD. As Kyle mentioned earlier, the Phase III studies for Osavampator in major depressive disorder and direclidine in schizophrenia continue to enroll well, alongside solid progress for the rest of our early to mid-stage pipeline. You've heard us talk about our upcoming R&D day throughout today's call. As my colleagues alluded to, we are excited to welcome the Wall Street community to our San Diego campus where we'll have an opportunity to provide greater detail into our long-term vision, much of which stems from enthusiasm around our clinical and early-stage programs, plans and recent progress. To provide a bit more detail on the agenda, I will provide an overview of our neuropsychiatry programs with a spotlight on Osavampator and our broad Muscarinic Agonist portfolio. Following my presentation, Dr. John Krystal, a leading psychiatrist from Yale University will join me for a moderated Q&A session. Afterwards, Jude Onyia, our Chief Scientific Officer, will discuss Neurocrine's ongoing R&D transformation efforts and preview a few of the next-generation programs expected to enter clinical development. We look forward to seeing many of you there as we unveil the foundation for Neurocrine's next chapter. With that, I will hand the call back to Kyle.

Kyle Gano, CEO

Thanks, Sanjay. I think we're ready to take questions now.

Operator, Operator

We'll take our first question from Phil Nadeau with TD Cowen.

Philip Nadeau, Analyst

Congratulations on a really strong quarter and great commercial performance. I wanted to just ask about the patient dynamics and patient starts for CRENESSITY. It did seem like enrollment forms were a little bit lower in Q3 than Q2. Was this seasonality or a sign of maybe an early launch bonus? Any insights you can give us on those trends would be helpful as we look to model the next several quarters of CRENESSITY?

Eric Benevich, CCO

Hi Phil, this is Eric. So obviously, we're really pleased with the overall adoption of CRENESSITY launch to date and with 540 new treatment forms in Q3. And we saw that as a continuation to the strong adoption that we saw earlier in the year in the first half. We said at the beginning, we expected this to be a steady or measured launch. And so far, it really has borne out that way. The weekly adoption has been really consistent over the course of the summer. We don't think that there's necessarily any kind of quarterly dynamics going on or seasonality. We are still early in the launch, and we'll have to see how things bear out after we've gone through a few cycles. But ultimately, we're really pleased with the enrollment. And with over 1,600 treatment forms through Q3, we're really optimistic and expect to see this accumulation of patients as we go forward.

Matthew Abernethy, CFO

Phil, thanks for setting the tone also and asking just one question. So just for hygiene purposes, we'll stick to the answering the first question that gets asked.

Operator, Operator

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

Paul Matteis, Analyst

Let me add my congrats on the quarter. I wanted to ask a question, I guess, about the IRA and I hope you bear with me as it has 2 subparts for this where I got is really only one question. Just can you help us set up how you guys are thinking about the upcoming AUSTEDO price that we'll learn about? And just what are the sort of implications for Neurocrine? And then for INGREZZA, given the increased discounting and now that we're looking at a gross net that's getting up into the mid- to high 30s. Should we think that the worst-case scenario for you has now changed given that the small biotech exemption has the discounting to a level that is actually potentially going to be below where your gross to net ends up?

Kyle Gano, CEO

Paul, there's a lot to discuss regarding this. I'll begin with the first question and see where we go. Concerning AUSTEDO, we expect to learn about its pricing for both the current immediate-release and XR formulations in November. We anticipate hearing from CMS by late November, if not before. As for how this might affect INGREZZA, we are currently trying to understand the potential reactions of health plans and PBMs to AUSTEDO's pricing. It seems likely that they will employ various strategies for both medications involved with the IRA and those that are not. We have a mix of certainties and uncertainties. At present, INGREZZA proves to be a very dependable medication, with patients typically remaining on it once they start. This leads us to focus on new patient starts over the two-year period from 2027 to 2029, which coincides with our own IRA year. We plan to establish contracts over the next 12 to 14 months, and as we near 2027, our goal is to maximize the number of patients on INGREZZA between now and the end of 2026. This should help mitigate any headwinds regarding new prescriptions, which currently only represent about 5% of our total prescriptions. On a quarterly basis, that figure is quite small. We will also monitor any insights from medications undergoing negotiations and implementation next year. Most importantly, we will focus on what we can control with INGREZZA while working to strengthen our entire portfolio.

Eric Benevich, CCO

Paul, this is Eric. I just want to chime in and kind of reinforce a couple of points. One is that we do believe that there's room on formularies for MFP adjacent products. We think that PBMs and health plans will behave differently. There's not going to be sort of a uniform approach that they take. And kind of tying in with our prepared remarks, it's really important that we maximize patient share going into '27 and beyond. And currently, that's what we're doing and that's part of the rationale for the sales force expansion for INGREZZA.

Operator, Operator

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

Tazeen Ahmad, Analyst

Mine is going to be on CRENESSITY. So is it too early to know this, but are payers already looking for a certain level of steroid tapering in order to continue covering therapy? And just in terms of number of days in Q3 versus Q4, we're heading into the holiday season. So how should we be thinking about the potential for seasonal impact for CRENESSITY sales in Q4?

Matthew Abernethy, CFO

Thanks for the question, Tazeen. This is Matt. We're not really anticipating seasonality outside of just the pace and cadence of patient visits into the clinician's office. So nothing on the seasonality front. In terms of reimbursement, really has not been a requirement for patients to titrate down steroids to a specific extent. It's really looking at do they have the underlying disease and do they have treatment with hydrocortisone? And if that's the case, reimbursement has been quite smooth. I just give a shout-out to the team working on this, advocating on behalf of patients. And I'd say the insurance providers can understand the benefit of this new medicine for these patients.

Operator, Operator

And we'll go next to Akash Tewari with Jefferies.

Unknown Analyst, Analyst

This is Steve on behalf of Akash. Regarding INGREZZA, considering that AUSTEDO is already significantly more expensive than regular AUSTEDO, have you observed any changes in payer preferences so far? Additionally, with the upcoming IRA negotiated pricing, how can you secure INGREZZA's pricing through 2026 ahead of this announcement?

Eric Benevich, CCO

Yes. No, thank you for the question. So I think the health plans are seeing that part of what Teva is doing is trying to push patients to higher dose strengths of both the BID and the XR formulation of Deutetrabenazine, and since that product has a per-milligram pricing structure, higher doses mean more revenue per patient. Health plans are catching on to that. And we have seen examples of health plans that would, for example, cover the BID formulation, but not the XR. So I think that the fact that we've seen this dose creep dynamic and/or patients transitioning to the XR formulation being more expensive to the plan that they've been more willing to engage with us. And I think it partly explains the ability that we've had this year midyear to expand our formulary coverage. The coverage that we have now, we expect to carry through 2026. And so in terms of expectation setting for next year, we should expect at least the same level of formulary coverage that we have now.

Matthew Abernethy, CFO

But in most instances, we're seeing that we have equal access from a formulary perspective. Our goal has always been to give clinicians a choice in selecting the medicine they prefer. This will also be our strategy moving forward.

Operator, Operator

We'll go next to Mohit Bansal with Wells Fargo.

Mohit Bansal, Analyst

Great. And would love to touch upon the 10-Q filing and the talks about DOJ investigation. Any color you can provide on that? And how should we think about the next time line from this one?

Kyle Gano, CEO

Hi, Mohit. This is Kyle. I appreciate the question here on this. In August, we received a CID, a Civil Investigative Demand from the DOJ requesting certain documents and information attached to sales, marketing and promotion of INGREZZA. Of course, we're fully cooperating with the DOJ. And I think right now, there's not much more to say on that. We'd certainly keep the external community updated when there's material information to share on that. The only piece I would conclude with is that we have an extremely robust compliance program here at Neurocrine. We take compliance seriously and the responsibility that comes with that. And as we move forward here, we'll continue business as usual because we think that's the right thing to do. Again, we'll keep folks updated as we learn more.

Operator, Operator

We'll go next to Cory Kasimov with Evercore.

Cory Kasimov, Analyst

Mine is on CRENESSITY. I guess I'm wondering if you can speak to where you are with getting CRENESSITY up and running at this point at the centers of excellence and then the progress that's also being made in the community setting where docs see fewer patients. Are you more or less at every COE at this point? And do you see that opportunity in the community level?

Eric Benevich, CCO

Yes. To summarize, we estimate there are about 20 centers of excellence that care for approximately 15% of the classic CAH patient community. All the centers have begun to adopt changes, albeit at different speeds, reflecting the various ways they operate, their levels of bureaucracy, and access issues. Overall, we believe the adoption rate in these centers largely depends on how many patients are being treated. We have also been pleasantly surprised by the adoption rate among community endocrinologists who treat adults. Many of these practices have only one or two patients, creating a broader pool of healthcare providers to engage. This connects back to our earlier comments about expanding our field sales team to reach deeper into our target market and connect with some practices we have yet to approach.

Operator, Operator

We'll go next to Anupam Rama with JPMorgan.

Anupam Rama, Analyst

Congrats on the quarter. Could you provide a little bit more color and maybe some quantification around the sales force expansion for both products in terms of the segments that are going to be targeted here for INGREZZA. Is it psychiatry, neurology, long term or for CRENESSITY, general endos versus pediatric endos?

Eric Benevich, CCO

Yes. So in terms of scale, I would characterize it as about a 30% increase in terms of our overall sales footprint across both products. Obviously, INGREZZA is a bigger product. So most of the incremental headcount are going to be going to INGREZZA. I said in my prepared remarks that we were going to be both restructuring and expanding. And what we're doing with INGREZZA is essentially combining our existing psychiatry and neurology teams and then expanding the headcount there because what we've seen is that we could do a better job, I think, of covering our psychiatry and neurology customers who, in many ways, are more similar than they are different by having a cohesive team versus having multiple different teams with different reporting structures. So I think that this simplifies things substantially for us going forward. We're going to keep the LTC team separate and we are expanding that group as well. There's been a continuing fast-growing segment for us. So we're excited about increasing our coverage of high-potential psych providers and neurology providers with the Neuropsych team and then adding more headcount into LTC. The expansion with CRENESSITY is obviously smaller in scale. Our existing team is less than 50. So this is going to be a relatively smaller expansion, but it does allow us to go deeper especially in those community endocrinology practices and ultimately to accelerate adoption in classic CAH and help more patients faster.

Matthew Abernethy, CFO

This is really a reflection of our belief in the TD market, an opportunity that we have ahead. Eric's track record here, this is probably our fourth expansion. Every time we've done it, we've seen a tremendous response and the team has done a great job driving more patients onto therapy. So I would look at this investment as clearly being to accelerate the market development and to maximize the number of patients on therapy, and we feel fortunate to have 2 great medicines to do this with.

Operator, Operator

And we'll go next to Jay Olson with Oppenheimer.

Jay Olson, Analyst

Congrats on the quarter. We have a pipeline question related to direclidine. As you look at potential indications beyond schizophrenia and bipolar, are you considering Alzheimer's psychosis? And are there any particular lessons you expect to learn from the Cobenfy Phase III study in Alzheimer's when that study reads out and any potential read across to direclidine?

Sanjay Keswani, CMO

Yes. Thank you so much for the question. So as you mentioned, with 568 or direclidine, we're targeting our Phase III program in schizophrenia. We have initiated a Phase II bipolar mania study, that's this year. We're also very interested in Alzheimer's disease psychosis. We do have a pretty robust muscarinic portfolio, and indeed, we'll unveil that at R&D Day in December. But we have a lot of options in terms of which molecule we use, M1 preferring, M4 preferring, dual agonist for various indications. So at the moment, we're thinking about AD psychosis for one of our follow-on molecules, which has particular advantages with respect to safety considerations in the elderly. Yes, we'll be watching BMS' Cobenfy data very closely. Our understanding is that their ADEPT Phase III study will be reading out relatively soon. They're going to be lessons learned, I think, for the whole field.

Operator, Operator

We'll go next to David Amsellem with Piper Sandler.

David Amsellem, Analyst

So I wanted to come back to the sales force expansion for INGREZZA. So you've had a number of sales force expansions over the years over the commercial life of the product. So I guess with that in mind, at what point do you think this commercial organization is going to be rightsized? And also at what point do you think the level of DTC spend is going to be rightsized? In other words, when do we start to see more aggressive margin expansion associated with the product?

Matthew Abernethy, CFO

So on the margin expansion, we've made tremendous progress over the last 5 years being in the low 50% range all the way down to this year, we should be in the low 40% range. And growing revenue to almost $800 million this quarter is just a testament to the investments as well as the markets that we're playing in. So when will we be 100% rightsized? We always invest as much as we can to pull as much revenue forward in any of these situations, and we're learning a lot as we go with the TD market. But overall, from a margin expansion perspective, we look into the last part of this decade as being in a place where we'll continue to drive leverage, albeit maybe not as much as what had been anticipated in '26, but it's really with an eye to maximize the number of patients on therapy heading into the '27 to '29 window.

Kyle Gano, CEO

Maybe I'll just add there to that. I think we touched on this already, but the INGREZZA market as it relates to TD is an incredibly robust growth engine for the company. And as much as we lean on the performance of the medicine, we're still only treating 10% of the 800,000 patients that are out there. And that was with the backdrop of the TD prevalence continuing to increase at the rate of growth of the antipsychotics, which is 3% to 4% per year, which is 3 to 4 times greater than the general population. You put all those pieces together, the number of prescribers increases year-to-year as well. It's increasing faster than we've expanded the sales force over the years. In fact, I believe the past 2 years, the prescriber base has increased by 30%. So as much as we have looked at ways of reaching all of these patients and prescribers over time, the current structure of our sales organization is actually smaller than some of the companies out there with products just within schizophrenia. So we like where we're headed to right now, but it's still an organization that is rightsized for tardive dyskinesia and not so much for some of these larger psychiatry indications. And I think this is a step that not only helps us with INGREZZA, but as Eric said in his opening remarks, sets the stage quite well for us as we look at osavampator and direclidine in Phase III and their potential launch in the second half of this decade.

Operator, Operator

We'll go next to Brian Skorney with Baird.

Luke Herrmann, Analyst

This is Luke on for Brian. On the upcoming 770 readout, can you talk about your expectations for the data? And what type of result in your view would support a confirmatory Phase II as compared to moving right into pivotal?

Sanjay Keswani, CMO

Yes. So we are expecting the results of the Phase II study for 770, that's an NR2B NAM, this quarter. Just a context, the Phase II is a relatively small signal-finding study, so 72 patients total, with 3 active arms as well as placebo. So I think the likelihood is that we would go into confirmatory Phase IIb if the results we see are encouraging. But we won't discount going to Phase III at this moment. In terms of, frankly, what we'd like to see, we would like to see esketamine-like efficacy, not too dissimilar from SPRAVATO, but without the baggage of some of the associated side effects, which mandate a 2-hour in-house observation period post-dose. But I guess we'll see what we see later this quarter.

Operator, Operator

We'll go next to Brian Abrams with RBC Capital Markets.

Brian Abrahams, Analyst

Congrats on the quarter. I was wondering if you could talk a little bit more about CRENESSITY persistence, just now that you're several quarters in. Can you be any more specific on in terms of what you're seeing there? And then just the overall KOL feedback around patients who started on the drug early in the launch and the glucocorticoid equilibration at this point now that patients have been on drug for many months.

Eric Benevich, CCO

I would describe CRENESSITY's persistence and compliance as very strong. We were optimistic before the launch that we would observe a high level of adherence to the medication, based on our findings from the double-blind studies and the open-label extensions. Most patients who began treatment earlier this year are still continuing with it. Regarding feedback on the reduction of glucocorticoids, you likely have been hearing similar responses from your doctor calls. Patients remain on treatment for a while, and doctors are looking to see how to decrease the androgens before starting to taper down the glucocorticoids, which can vary depending on the provider and the specifics of each patient’s situation. Overall, we are receiving very positive feedback about disease control related to androgen reductions and the potential to lower glucocorticoids to more physiological levels.

Operator, Operator

And we'll go next to Marc Goodman with Leerink Partners.

Marc Goodman, Analyst

Yes. Matt, at the beginning of the year, you were pretty conservative with respect to the CRENESSITY launch. I think your main issue, if I remember, was just reimbursement concerns and how quickly that would be adopted. Obviously, that's been adopted way better than anybody could have expected, I suppose. So how do we think about gross to nets now? I mean they clearly have come down a lot, just working through the numbers. Are we continuing to move lower quite a bit outside of maybe the first quarter next year just because the first quarter is unusual? But if you think about the next 3, 4 quarters, are they just going to continue to come down and ramp down to more normalized levels for what we consider an orphan product like this?

Matthew Abernethy, CFO

In terms of guidance for gross to net, I would describe it as having a discount of less than 20%, which is what we anticipate for the foreseeable future. The dynamics of gross to net are influenced by the patient demographics, as the majority are commercial patients, but we also serve a number of Medicaid patients which require statutory rebates. Overall, the reimbursement rate is above 80%. As Eric mentioned, 9 out of 10 patients have had their claims adjudicated. Therefore, I feel confident about our current position and our expectations for the future.

Operator, Operator

We'll go next to Sean Laaman with Morgan Stanley.

Sean Laaman, Analyst

Maybe just circling back on INGREZZA. But can you comment on neurology versus the psych split? And is it a focus on psych to the expense of neurology? I think I heard AUSTEDO had a strong uptake in neurology, especially during COVID? And what are your plans for neurology?

Eric Benevich, CCO

Yes. Neurology represents about 15% of our total volume. Obviously, all of the business segments, neurology, psychiatry, and LTC have been growing like gangbusters this year, in particular. But on a relative basis, it's now the smallest segment that we have. And we view it as important, but it doesn't have the same kind of patient potential that we see in psychiatry. As I said in my prepared remarks, the fastest-growing segment is really advanced practice providers that are in behavioral health. And so this reorganization and kind of combining our teams across psychiatry and neurology sort of puts our resources where we see the highest growth potential. And behaviorally, the psychiatry segment and the neurology segment are more similar to each other than LTC. And so we're keeping LTC separate, expanding that team. We're combining our psych and neurology teams and then expanding that team. And ultimately, we want to make sure that we can keep up with the pace of this market that's very fast-growing and continue to drive new patient starts. This is an investment in growth, as we said, and we really like the trajectory that we're on now.

Kyle Gano, CEO

Maybe just to add to that real quickly on the neuro piece. Just keep in mind, a lot of interest has come from the side of the chorea side of the indication opportunity with INGREZZA. For HD chorea, there are about 30,000 patients in the U.S., about 90% have chorea. So that 20,000 number is about a 40:1 ratio to the TD patients that we see out there today. So I think that speaks to some of the volume flow that we see across the neuro and psych piece and that's something that we keep in mind as we look at for their investments down the road.

Operator, Operator

We'll go next to Yigal Nochomovitz with Citi.

Yigal Nochomovitz, Analyst

I had one on capital management. You mentioned, obviously, the increase in SG&A of about $150 million to expand both sales forces. So with that in mind, I'm just curious how are you thinking about the continuation of the buyback at the pace of that buyback related to the new $500 million buyback allocation?

Matthew Abernethy, CFO

Yes, we currently have $2.1 billion in cash, no debt, and we are profitable. We are focusing our capital on driving top line growth and investing in research and development, targeting a range of 35%. While we do have the flexibility for share buybacks, our preference is to use our capital for business development activities. Right now, we are concentrating on advancing our internal initiatives.

Operator, Operator

We'll go next to Corinne Johnson with Goldman Sachs.

Corinne Jenkins, Analyst

Maybe a question for us. Can you talk about where you stand with respect to share of kind of new to category or new to class patients with INGREZZA versus AUSTEDO? And where do you think that could go? Maybe contextualize that versus where we were a year ago and where you think we could go with the expanded sales force over kind of the next year?

Eric Benevich, CCO

Yes. As Matt mentioned, the new patient starts or NRx in any given week or month are single-digit percent of total TRx. But they're critically important because of the persistency and compliance that these patients have on INGREZZA, that they represent a significant number of likely refills. And what we've seen really since the beginning of the year with the prior expansion of our field sales team and then the investment that we've made in increasing formulary coverage, particularly in the Medicare segment is that we're getting the majority of new patient starts, and that's really what's driving increased total market share from a patient perspective and that's really an important part of our strategy going forward. This momentum that we're carrying through '25 into '26, we want to make sure that we continue that into that critical time period of '27 and beyond. So the way I would look at it is we're gaining the majority of new patient starts now, and we intend to continue doing that going forward.

Operator, Operator

We'll go next to Ash Verma with UBS.

Ashwani Verma, Analyst

I'm just trying to understand the medium-term growth outlook for INGREZZA given the sales force investment and the contracts that you've done. For the years before IRA impact, do you believe that you can grow at a higher pace versus where you've guided to this year?

Eric Benevich, CCO

Yes. I would describe the current situation as double-digit growth in the VMAT2 market this year, with our brand outpacing the market growth. We're very pleased with our growth trajectory. For Q3, we achieved 12% year-over-year growth, and our aim is to maintain this momentum through 2026 and beyond while maximizing our patient share. We will provide more details as we approach our Q4 earnings call and discuss projections for 2026. However, it appears that the VMAT2 market, particularly for INGREZZA, will continue to experience strong growth next year and thereafter.

Operator, Operator

We'll go next to Ami Fadia with Needham.

Ami Fadia, Analyst

It's on NBI-770. Given that this study is not necessarily powered for statistical significance, just on an absolute basis, what is the level of change in the primary endpoint that you're looking to see as you think about some of the other drugs, such as SPRAVATO or rather psychedelics in the space? And eventually, are you thinking of studying this in TRD or MDD? Just sort of current thoughts.

Sanjay Keswani, CMO

Yes, really good question. So yes, it's a relatively small study. So I'm hesitant to give an effect size that, frankly, we would be considered as successful versus not because I think there's a huge amount of unmet need in this population. As you mentioned, there are potentially 2 populations that we could target with 770. And one is adjunctive treatment in MDD, which is currently where the program is headed. But we clearly could go down the SPRAVATO route with respect to TRD as well with this mechanism. So we have a couple of options. We will decide that, I think, based on the data that we'll receive later this quarter.

Operator, Operator

We'll go next to Sumant Kulkarni with Canaccord.

Sumant Kulkarni, Analyst

As the Inflation Reduction Act kicks in for your competitor, could you comment on where you might see the most impact on INGREZZA, either in terms of the profile of patients or by prescriber type? And on the neuropsych side specifically, what might be the maximum number of products that you might be able to leverage the situation of your expanded neuropsych sales team?

Eric Benevich, CCO

Certainly, I will address the second part of your question. We would welcome the challenge of introducing three products into psychiatry and long-term care simultaneously. We are particularly excited about our late-stage pipeline with both direclidine and osavampator progressing through Phase III trials. As mentioned by Kyle earlier, we anticipate data and potential launches in the latter part of this decade. The expansion we're currently undertaking positions us well for the possibility of launching either of these two products, or even both. However, I should note that if we were to launch osavampator, we might not have the necessary coverage among future primary care prescribers. This takes us partway there, but it doesn't fully meet our needs. Nonetheless, I believe it will minimize the changes required for us to prepare for either of those launches in the future.

Matthew Abernethy, CFO

In terms of the impact from the IRA and the negotiations, we believe that existing patients will continue their therapy during this time. As we look ahead to the next two years, we are focused on where new patients will go. Therefore, our current efforts aim to increase the number of patients on therapy until 2027. We will manage everything we can to maximize that number, and we are confident we will succeed in this timeframe. However, we anticipate gaining more insights about the MFP for AUSTEDO and payer behavior in the upcoming months. For factors within our control, we are doing everything possible. We have a solid market and an excellent medicine here.

Operator, Operator

And we'll go next to Yatin Suneja with Guggenheim.

Yatin Suneja, Analyst

One clarification, the 14-week dynamic or one extra week dynamic, that is just specific to INGREZZA? And then if you can just comment also on the inventory, if you can, for CRENESSITY.

Matthew Abernethy, CFO

Yes. CRENESSITY inventory build was about $7 million for the quarter. And then as it relates to the 14 week, that does pertain to INGREZZA primarily. And you can assume that was almost a full week of impact on the quarter. So when you want to normalize Q3 to think about trajectory into Q4, I think it's safe to assume remove the week and then you can grow off of that base from there.

Operator, Operator

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

Myles Minter, Analyst

This one is just on CRENESSITY new starts. I think in the second quarter, you had 664. You got 540 this quarter. So some sort of warehousing effect that's bleeding out of those patients. Can we expect that sort of trajectory for the next quarter and maybe a return to growth when you get that sales force expansion hitting into the new year?

Eric Benevich, CCO

Yes. The way I would characterize the adoption in Q3 was that very consistent and steady. We said this would be a measured launch. And so far, it has played out that way. Although the overall rate of adoption, I think, since day 1 has been a little bit quicker than what we anticipated prior to the launch. We were helped out a little bit in Q2 by the wind down of the adult open-label study. And so there were some patients that transitioned towards the end of Q2 to commercial drug that bumped up numbers a little bit. But overall, I'd say that the rate of weekly enrollments has been pretty consistent across both Q2 and Q3.

Kyle Gano, CEO

Maybe I'll just add here quickly. The launch continues to exceed our expectations, and that's across the board, enrollment forms, persistence, compliance and that's played out here ultimately. As time moves along, the combination of the steady adoption of CRENESSITY as well as the persistency is going to stack volume over time and gives us all the confidence that we have a need for this to be our next blockbuster here.

Operator, Operator

We'll go next to Danielle Brill with Truist.

Alexander Nackenoff, Analyst

This is Alex on for Danielle. I'm curious if you're noticing any changes in the breakdown of new prescriptions between pediatrics and adults? Also, are there any trends in the usage of the free drug program?

Eric Benevich, CCO

No major shifts from the demographic perspective. It still is skewing towards younger patients and primarily towards female patients. That pattern kind of kicked in after about a quarter or so on the market, and it's been pretty steady ever since. And then what was the second half of your question, I'm sorry?

Alexander Nackenoff, Analyst

Just on...

Eric Benevich, CCO

That was on the drug part?

Alexander Nackenoff, Analyst

Yes.

Eric Benevich, CCO

Yes. It's actually continues to be less than what we had anticipated it would be. The idea being that if insurance hadn't approved the claim after about a week, that we would be able to offer a month supply of CRENESSITY to get someone started pretty quickly. And as I mentioned earlier, 9 out of 10 patients that are on CRENESSITY have gotten their prescription approved through their insurance. And so not that many people end up on the free drug program, to be honest with you.

Operator, Operator

We'll go next to Laura Chico with Wedbush Securities.

Laura Chico, Analyst

One of the pipeline with respect to valbenazine and dyskinetic cerebral palsy. The data coming up here. Can you talk a little bit more about what will constitute a meaningful change in chorea score in a CP population? But also, I guess, against the backdrop of the INGREZZA field force expansion, how should we think about the size of the opportunity and overlap with existing INGREZZA prescribers?

Sanjay Keswani, CMO

Yes, I'll do the first question really quickly, and I'll hand on for the second. So this population of dyskinetic cerebral palsy doesn't have a priori-validated scale. So essentially, we're borrowing from the UHDRS, Huntington's scale. Our assumption is that typically a significant effect in that would be meaningful enough. Clearly, we'll be seeing the totality of the data later this quarter.

Kyle Gano, CEO

And maybe this is Kyle. I just want to add to the next steps on this. We would take a robust data set to the agency and ensure that there is a way forward for an NDA submission. With the current size and composition of the sales force, we would be prepared in case it was an sNDA.

Eric Benevich, CCO

This is Eric. The last thing, I'll chime in here. The DCP population is larger than the Huntington's chorea population, but still substantially smaller than the TD population. And the expanded sales team, if this turned into an indication down the road, would be able to cover all the potential prescribers.

Operator, Operator

We'll go next to David Hoang with Deutsche Bank.

David Hoang, Analyst

Congratulations on a strong quarter. I noticed you have maintained guidance but haven't increased it. You mentioned the extra week in Q3 for ordering, but when considering what the Q4 numbers might look like, it seems the guidance suggests a decline in the mid-single digits to flat. Is there anything else to consider regarding potential seasonal dynamics or a level of caution in your projections?

Matthew Abernethy, CFO

Yes. If you back out the 14th week, I think it gets you into a place to grow off of. And then sequentially, what you've seen over the last handful of years is the fourth quarter typically will have a range of $15 million to $20 million of sequential growth. So my recommendation, David, is to normalize Q3 to a 13-week and then think about that type of a growth trajectory. Price should be pretty consistent. It was down 6% to 7% year-over-year in the third quarter. That should be something that you would experience in Q4 as well. So nothing abnormal on the pricing side.

Operator, Operator

And our final question comes from Evan Seigerman with BMO Capital Markets.

Evan Seigerman, Analyst

In your 10-Q filed today, there was a disclosure about the Make America Healthy Again commission issuing warning letters regarding DTC advertisements. You indicated that you got one for INGREZZA. Can you talk about what was in that letter and what you might need to correct given that, that is pretty important when it comes to the commercial plan for that asset?

Kyle Gano, CEO

Yes, I'll take this question. This is Kyle. I think many of us in the industry received a similar letter with similar types of contents in there. I think what a good view to have on this as a pharma member is we're committed to conducting responsible advertising for us. It is an important part of our business. We think it's a good opportunity for us to reach patients and also educate out there. We'll continue to look at that as an opportunity. But rest assured, we continue to do this in a responsible way, and we'll look to continue doing that moving forward.

Operator, Operator

And this does conclude today's question-and-answer session. I will now turn the call over to Kyle Gano for any additional or closing remarks.

Kyle Gano, CEO

Thank you, and thanks, everyone, for the good discussion and call this afternoon. Looking ahead, we are confident in the company's direction and momentum. We hope you can see here today that we're executing with clarity and discipline. Expanding 2 commercial franchises in INGREZZA and CRENESSITY, advancing a robust and growing pipeline. We talked about some of our mid- to late-stage assets today and investing in the next generation of innovation. This is what Neurocrine is about today and in the future. It goes without saying we look forward to meeting with many of you at the upcoming and remaining conferences this year and certainly at our R&D Day on December 16. Thanks again.

Operator, Operator

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