Earnings Call Transcript - NBIX Q1 2024

Operator, Operator

Good day, everyone, and welcome to Neurocrine Biosciences Reports First Quarter Results. Please note this call is being recorded. It is now my pleasure to turn the conference over to Todd Tushla, Vice President of Investor Relations. Please go ahead.

Todd Tushla, Vice President of Investor Relations

Good morning, everyone, and welcome to Neurocrine Biosciences First Quarter 2024 Earnings Call. With me are Kevin Gorman, Chief Executive Officer; Matt Abernethy, Chief Financial Officer; Eiry Roberts, Chief Medical Officer; Eric Benevich, Chief Commercial Officer; and Kyle Gano, Chief Business Development and Strategy Officer. We're also joined today by Dr. Jaz Singh, Neurocrine's Vice President of Psychiatry Clinical Development. With introductions complete, I'll remind you that 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. At this point, I'll turn the call over to Kevin.

Kevin Gorman, CEO

Thank you, Todd. Good morning, everyone. We've had a remarkable week and it's only Wednesday morning. We've submitted two NDAs on crinecerfont and received an FDA approval for a new offering of INGREZZA. Neurocrine has never had the opportunity to positively impact so many lives as it has today. We are making progress in every aspect of our business, focused on bringing life-changing medicines forward. We have never treated as many TD and HD patients as we are treating today. We have never had as deep a mid- and late-stage clinical pipeline, and now we have good visibility into a number of potentially new medicines coming into the clinic from our research group in the next two years, several of them with the promise of disease modification. Now we're constantly prioritizing the funding of our programs based on data. A recent example of a program that will see increased funding is our AMPA modulating molecule, 845, as a treatment for major depression. The efficacy and tolerability seen in this trial is very compelling, and we will be meeting with the FDA to further define the registration program. We will limit our comments on this data set as we file additional intellectual property and protect future publication opportunities. So with those brief remarks, I'd like to turn it over to my colleagues, starting with Matt.

Matthew Abernethy, CFO

Thanks, Kevin. Let us start with 2024. With continued INGREZZA growth, our ongoing activities with crinecerfont, and last week's announcement of positive Phase II results in major depressive disorder, the foundation to build Neurocrine into a leading neuroscience company has never been stronger. INGREZZA's sales finished the quarter at $506 million, reflecting over 20% year-over-year growth and our third consecutive year of Q4 to Q1 sequential growth. The seasonal payer dynamics associated with reauthorization and plan changes always pose challenges impacting refill rate per patient, but the team has managed through these dynamics well once again. We are reaffirming sales guidance and we'll reevaluate after the second quarter. As to review our financials, you can see significant year-over-year operating leverage on a non-GAAP basis of over 1,000 basis points when excluding IP R&D investments made in the prior year. The team is doing a great job generating SG&A leverage, reflecting the strength of our INGREZZA franchise. We ended Q1 with over $1.9 billion in cash. We routinely evaluate what we believe will drive shareholder value and our capital allocation strategy remains intact, prioritizing INGREZZA growth; preparing for crinecerfont commercialization; internally advancing our pipeline; and assessing external opportunities. As we have excess capital, we opportunistically return capital to shareholders and you've seen us accomplish this over the past few years, reducing our convertible debt from approximately $518 million to $170 million. In a few weeks, we'll manage dilution further by retiring our May 2024 convertible notes with cash, not shares. The convertible notes have a face value of $170 million and fair value as of March 31 of around $310 million. We recorded an $89 million charge representing a portion of the cost to fully settle the convertible notes. With that, I will now hand the call over to Eric Benevich, our Chief Commercial Officer.

Eric Benevich, Chief Commercial Officer

Thanks, Matt. Today, May 1 marks the seven-year anniversary since the commercial launch of INGREZZA in 2017. After seven years, INGREZZA is the #1 prescribed VMAT2 inhibitor for the treatment of tardive dyskinesia or TD. INGREZZA is the only treatment proven to reduce TD symptoms with simple dosing, always one capsule once a day and no complex titration. We're very proud of the progress we've made with INGREZZA over these past seven years, and we're excited about the many thousands of people living with TD or Huntington's chorea that we will be able to help in the coming years. In addition to today's being the seven-year anniversary of our launch, we're less than a week away from TD Awareness Week, which occurs from May 5 through 11 this year. Each year, TD Awareness Week occurs in early May, which is designated as mental health awareness month. So please join Neurocrine, the Movement Disorders Policy Coalition, various mental health advocacy organizations, healthcare providers, and policymakers across all 50 states in Washington, D.C. in our efforts to spread the word and reduce the stigma of TD. Now on to results. Our Q1 sales of $506 million represented robust year-over-year sales growth of 23% despite typical Q1 seasonal payer challenges. We continue to make good progress growing our franchise across all three business segments of psychiatry, neurology, and long-term care. The majority of patients who could benefit from treatment of their TD remain undiagnosed. So we continue to focus on driving awareness, diagnosis, and treatment with INGREZZA. Just yesterday, the FDA approved the new SPRINKLE formulation of INGREZZA. This new formulation represents a valuable treatment option for TD or HD chorea patients with difficulty swallowing. Overall, INGREZZA is again off to a good start for 2024, and we carry that momentum forward into Q2. Now quickly on crinecerfont for the potential treatment of congenital adrenal hyperplasia, or CAH. We've been busy staffing up and our endocrinology franchise team is now in place. We expect to complete hiring of the field teams in the second half of this year. Our primary focus in 2024 is on educating the CAH community on important topics, including disease-based pathophysiology and challenges of current steroid treatments. To that end, we rolled out an educational initiative called, 'What the CAH,' aiming to close the gap in CAH understanding. We're excited about the potential launch of crinecerfont in 2025, and we're laying the foundation this year to ensure our success going forward. So with that, I'll turn the call over to my colleague, Dr. Eiry Roberts.

Eiry Roberts, Chief Medical Officer

Thank you, Eric. Good morning. Since our last earnings call, our clinical and regulatory teams have made tremendous progress with the pipeline. Just yesterday, we received approval from the FDA for INGREZZA SPRINKLE capsules and submitted the new drug application for crinecerfont for the treatment of pediatric and adult patients with classical congenital adrenal hyperplasia. Given the unmet need in CAH, and the previously granted breakthrough designation for crinecerfont, we believe this submission may merit priority review. In the meantime, our teams are well prepared for all upcoming interactions with the agency. Throughout this quarter, additional details from the registrational studies of crinecerfont will be presented at several medical conferences, including ENDO in June. Moving to the Phase II pipeline. I'll begin with the encouraging positive study results of NBI-845 in adults with major depressive disorder. Recall, NBI-845 was one of several Phase II ready programs licensed as part of the Takeda collaboration. This molecule is a selective potential first-in-class positive allosteric modulator of AMPA receptors, designed to induce synaptic plasticity while maintaining a broad margin of safety. Last week, we announced the SAVITRI study met the primary endpoint with statistically significant reduction in the Montgomery-Åsberg Depression Rating Scale total score at day 28. The study met key secondary endpoints as well, including statistically significant reduction in the MADRS total score at day 56. NBI-845 demonstrated a strong effect size and was generally well tolerated in the study. The most common adverse event was headache, mostly transient and mild in severity. There were no seizures, no serious adverse events, no psychotomimetic or dissociative events throughout. Based on these encouraging data, we plan to engage with the FDA in the near future to define the path forward to registration. Many companies before Neurocrine have tried and failed to progress AMPA potentiators in the clinic due to issues of toxicity. Our partners at Takeda deserve enormous credit for their years of research activity in this field. In addition, we delivered positive Phase II results for two separate studies of Efmody, the long-acting glucocorticoid obtained through our acquisition of U.K.-based diurnal. The Phase II study of Efmody in adults with adrenal insufficiency and the Phase II study of Efmody in adults and adolescents with CAH, both reported top line positive results and were well tolerated. On top of crinecerfont's NDA submission and a total of three positive Phase II data readouts, we've initiated a number of new clinical studies. We look forward to providing more information on these programs together with our other Phase I muscarinic agonist programs over the coming months as they progress through the clinic. Looking ahead, we are currently on track to deliver data from NBI-568, our orthosteric selective muscarinic M4 agonist for schizophrenia and for luvadaxistat as a potential treatment for cognitive impairment associated with schizophrenia. We anticipate top line data from both studies in Q3 2024. In summary, I'm very proud of the progress we continue to make with the clinical portfolio at Neurocrine to deliver on behalf of the patients we serve. With that, I'll hand things back to Kevin.

Kevin Gorman, CEO

Thank you very much, Eiry. And Nicky, we're ready for questions now.

Operator, Operator

We'll take our first question from Tazeen Ahmad with Bank of America.

Tazeen Ahmad, Analyst

The first one for me is on 845. Congrats on the data that you press released. We did get a few questions about dosing and dose response. And to the extent that you can talk about dose response, is there any reason mechanistically we're not seeing a dose response still encourages positive results ultimately and moving forward in Phase III? And then second question on the SPRINKLE formulation for INGREZZA. Can you just remind us what percent of patients have trouble swallowing and what kind of impact do you expect that to have on sales now that you have this new formulation?

Eiry Roberts, Chief Medical Officer

Yes, let me take the first one, Tazeen. We haven't said anything about the doses other than one of the doses reached statistical significance. We're very encouraged by the robustness of the data, both in terms of the impact on the primary and key secondary endpoints, and overall tolerability. As we said, there were no serious adverse events. The most common adverse event was headache, which was transient and mild in severity. Both doses looked like placebo in terms of their safety profile. That's really important, given the history of this class of medications.

Eric Benevich, Chief Commercial Officer

Yes, I'll tackle the second question, Tazeen. So the SPRINKLE formulation, we estimate that 5% to 10% of people living with tardive dyskinesia or Huntington's chorea experience difficulty swallowing. So this represents a nice alternative for them to be treated with INGREZZA. In terms of the impact on the forecast, it's already integrated into our guidance. So we expected to get approval and we issued guidance at our last earnings call in the range of $2.1 billion to $2.2 billion.

Philip Nadeau, Analyst

Congrats on the progress. With the 568 data now expected next quarter, we're curious to get your most updated thoughts on what you need to see to advance that program into additional development, particularly given the competitive landscape? Can you give us some idea of what efficacy results you'd like to see? And what safety data and tolerability data would give you confidence that 568 could compete?

Eiry Roberts, Chief Medical Officer

Yes, Phil. We're really happy with the progress we've made with 568. Just to remind you, this is a study of around about 200 patients. It's a dose finding study, done in an adaptive fashion. In terms of the outcome, the primary impact of the study is the reduction in the PANSS score relative to placebo. We've seen a good effect size from other drugs in this class, and we'd be looking for something in that area in terms of the impact on the primary endpoint. However, it's the therapeutic index that's important here. Our approach of choosing a selective M4 agonist rather than a steroid modulator, we believe, has the opportunity to differentiate, but it will depend on the data.

Matthew Abernethy, CFO

One last comment. Just a big shout out to the muscarinic team. This is an important program for Neurocrine, and we're able to push forward the timing of when we'd expect top line data by a couple of quarters.

Julian Pino, Analyst

Just on 845, I know you're not disclosing anything on the doses, but any additional color on what you can provide for the placebo response that you saw, just thinking about moving into Phase III? And then on safety, I saw there's no seizures reported, but the modality historically does carry an additional risk for that. What do you think about potential seizure risk broadly moving forward and the overall safety profile? And then lastly, one quick one on the muscarinic. How much power do you expect to have for the individual dose arms that are at the higher receptor occupancy or in the expected active range?

Eiry Roberts, Chief Medical Officer

Yes, I'll answer the muscarinic one quickly. This is an adaptive Phase II trial. It has sufficient power to enable us to understand the dose response. On the AMPA program, we were very encouraged by the tolerability profile. Both doses looked like placebo in terms of the tolerability profile. So we obviously need more data in Phase III to learn more about the overall safety profile.

Jaskaran Singh, Vice President of Psychiatry Clinical Development

No, I think there were really no risk of seizure. We had a committee adjudicating every event and it was clear on the dosages.

Chris Shibutani, Analyst

Thank you very much. Good morning. On crinecerfont, saw the press release, NDA has been filed. Can you speak to the likelihood of a priority review and any potential timelines for that approval and launch?

Eiry Roberts, Chief Medical Officer

Yes, I can speak to that. In light of the significant unmet need here, the breakthrough designation and the robustness of the Phase III data submitted, we hope the FDA would consider this a priority review. We will communicate any further updates based on our interactions with them.

Akash Tewari, Analyst

Sorry about that. Can you talk about the benefits of having an adaptive trial design? Also, where does your team stand with titration protocols?

Eiry Roberts, Chief Medical Officer

Yes. The initial studies are in healthy subjects of the normal age range, not including elderly subjects. However, real-world data will allow us to explore those molecules in older subjects to be ready for the chosen Phase II path forward.

Jay Olson, Analyst

Could you comment on the advantages of your Voyager partnered GBA1 gene therapy program versus Prevail's program?

Eiry Roberts, Chief Medical Officer

We're pleased with the progress made preclinically with our collaboration with Voyager. The technology allows for a blood-brain barrier penetrant capsid for intravenous injection to treat CNS and peripheral manifestations, unlike the ICM administration used by Prevail's program.

Mohit Bansal, Analyst

I just wanted to probe a little bit on 845. How do you think about positioning this in the depression market? Where do you think it fits in?

Eiry Roberts, Chief Medical Officer

In terms of positioning, we envision that 845 would aim to offer a unique profile among existing treatments. We are examining how this potential first-in-class AMPA modulator could be distinct from existing therapies, especially the tolerability profile and onset of action we observed in trials.

Brian Skorney, Analyst

I was hoping you could speak to the performance of the placebo cohort relative to baseline?

Eiry Roberts, Chief Medical Officer

We shared the placebo adjusted information. This was a well-conducted study focusing on engaging with psychiatrists properly to ensure high-quality data.

Brian Abrahams, Analyst

How are you thinking about a go-forward plan for the drug?

Eiry Roberts, Chief Medical Officer

We were encouraged by the robustness of the data. Our intent and goal would be to enter registrational programs efficiently. We aim to assess the tolerability and efficacy to make informed decisions in the future.

Carter Gould, Analyst

Does the company have that capacity to run potentially half a dozen plus Phase IIIs?

Kevin Gorman, CEO

We are prioritizing our programs and keeping a close eye on our spend. We have the financial resources but cannot do everything. We'll continue to evaluate our path forward continuously.

Matthew Abernethy, CFO

The quality of data seen in important programs may require a step-up in investment. We'll continue to prioritize where we invest.

Anupam Rama, Analyst

Can you give color on what's driving the R&D uptick and the decrease in SG&A spend?

Matthew Abernethy, CFO

The increase on the R&D front is associated with milestone achievements in our partner programs. We've also conducted a review of our cost base which accounts for the decrease in SG&A spending.

Marc Goodman, Analyst

Can you talk about the additional data we're going to see for crinecerfont at ENDO in June?

Eiry Roberts, Chief Medical Officer

We're now working on the European authorization application and will communicate our timing soon. More information will be shared regarding the demographic baseline characteristics and the tolerability in upcoming publications.

Kevin Gorman, CEO

Thank you very much. I'm struck by what we are experiencing each day. I've never seen us in a better position than we are today. We're tackling difficult diseases with a robust research pipeline. The best days of Neurocrine are in front of us by far. I want to remind you that we understand that we're tackling psychiatric diseases that are very difficult, and we are committed to using multiple mechanisms. Thank you for your questions this morning. We look forward to discussing our projects going forward.

Operator, Operator

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