Earnings Call Transcript - NBIX Q2 2023

Operator, Operator

Good day, everyone, and welcome to today's Neurocrine Biosciences Reports Second Quarter Results. It is now my pleasure to turn today's program over to Todd Tushla, Vice President of Investor Relations.

Todd Tushla, Vice President of Investor Relations

Good morning, and welcome to Neurocrine's second quarter 2023 earnings call. Today, I'm joined by Kevin Gorman, our Chief Executive Officer; Matt Abernethy, our Chief Financial Officer; Eiry Roberts, our Chief Medical Officer; Eric Benevich, our Chief Commercial Officer; and Kyle Gano, our Chief Business Development and Strategy Officer. During 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 prepared remarks, we will jump into Q&A. With that, I'll turn the call over to Kevin Gorman.

Kevin Gorman, CEO

Thank you, Todd, and good morning, everyone. It's a pleasure to be here this morning. We've had a very strong first half of the year, as you can see from our press release this morning; we are raising our guidance. So what was previously the high end of the range is now the bottom of the range. Very strong performance and very proud of our commercial team out there with INGREZZA. We're now set up for a really exciting second half of the year. We have multiple readouts coming from our pipeline, led by our PDUFA date for INGREZZA and the Chorea associated with Huntington. We have a Focal Onset Seizure data coming out, Anhedonia - data coming out. And last but not least at all, are the CAH studies, both in the adult and in the pediatric population, and Eiry is going to have a lot more to say about that a little later, and we'll also be taking your questions on that. So quite a bit going on here. It's all been very nice thus far. So I'm really looking forward to the second half of the year. And right now, I'm going to turn it over to Matt.

Matt Abernethy, CFO

Good morning. Neurocrine continues to execute with growing INGREZZA sales, improving profits, and an advancing pipeline. During the second quarter, INGREZZA sales were $440 million with year-over-year growth of 26%, driven by record new patients. Our commercial and medical affair teams continue to do an excellent job educating prescribers and developing the TD market, helping many new patients receive treatment. With the solid first half of the year, we are increasing 2023 INGREZZA sales guidance from $1.77 billion to $1.82 billion, reflecting over 25% growth at the midpoint of the range. This compares to our previous INGREZZA sales guidance range of $1.67 billion to $1.77 billion. With growth in sales and reduced operating expenses, our profit profile improved during the quarter to over $120 million of non-GAAP net income. These profits generated strong cash flow and now have over $1.3 billion of cash on hand, providing plenty of financial flexibility to execute our strategy by allocating capital towards developing the TD market for INGREZZA, advancing our clinical pipeline, and expanding our internal research efforts. We believe this strategy will create shareholder value in both the short and long term. I will now hand the call over to Eric Benevich, our Chief Commercial Officer.

Eric Benevich, Chief Commercial Officer

Thanks, Matt. I'm very pleased with INGREZZA's sales performance through the first half of the year. Year-over-year sales grew 26%, driven by strong prescription demand across new and existing patients. As previously noted, we anticipate a majority of growth in 2023 to be driven by the psychiatry and neurology business segments where most TD patients receive their care. In long-term care, we are gaining traction and expect to see good growth as we continue to develop that segment. With $850 million of INGREZZA sales in the first half of the year, as Matt said, we felt it prudent to raise the guidance range from $1.67 billion to $1.77 billion, up to now $1.77 billion to $1.82 billion. The low and high end of the updated range is driven primarily by the pace of new patient starts throughout the second half of the year. Outside of TD, our commercial and medical teams have been preparing for the anticipated FDA approval and subsequent launch of valbenazine to treat Chorea associated with Huntington's disease. Despite the availability of improved treatment options, there remains a significant unmet need across this patient population. While we have not factored in any potential HD Chorea sales into our guidance, we are confident in the efficacy and safety data that we've generated with valbenazine in the clinical program, and we look forward to a potential approval in HD Chorea next month. We believe we can make a positive difference for patients suffering from HD Chorea. All in all, we are on track to deliver another year of record results for INGREZZA. Growth numbers like these are especially impressive for our product in its sixth year on the market. However, the fact remains that a majority of TD patients still have not received the diagnosis or even any explanation for their TD movements. We know we still have a tremendous opportunity to help more TD patients and hopefully, someday soon, HD Chorea patients as well. With that, I'll turn the call over to Dr. Eiry Roberts, our Chief Medical Officer.

Eiry Roberts, Chief Medical Officer

Thank you, Eric, and good morning to everyone on the call. Our clinical programs continue to make steady progress, which will lead to several important milestones and data readouts throughout the rest of this year and in the years to come. Looking specifically to the second half of this year, we will soon be reaching inflection points for a number of mid- to late-stage programs, beginning with the August 20 PDUFA date for valbenazine for the treatment of Chorea associated with Huntington's disease. Eric highlighted the confidence we have in the strong efficacy and safety data package generated to support approval. We've also had very good engagement with the FDA and look forward to the agency's feedback regarding the potential approval for an important second indication for valbenazine. With respect to data readouts, we remain on track to report top line results from 4 studies in the fourth quarter of this year. This includes data from both the pediatric and adult registrational studies of Crinecerfont for the treatment of Congenital Adrenal Hyperplasia. Separately, enrollment is now complete in 2 Phase II studies, both of which remain on track to readout in Q4. This includes NBI-352 for the treatment of focal onset seizures in adults and NBI-846 for the treatment of anhedonia associated with major depressive disorder. Turning now to our muscarinic portfolio. We are making very good progress with enrollment in the Phase II study of NBI-568 for the treatment of schizophrenia. In addition, this year, we're advancing into Phase I, our second muscarinic molecule, NBI-570, a dual M1 M4 agonist. These first 2 assets represent just the first wave of muscarinic compounds that we expect to progress into the clinic over time and explore across a number of neuropsychiatric conditions. Overall, I continue to be very pleased with the progress our teams are making with the most broad and diverse pipeline Neurocrine has ever had. And with that, I'll hand the call back to Kevin.

Kevin Gorman, CEO

Thank you very much, Eiry. And we're ready to take questions now.

Paul Matteis, Analyst

Hey. Thanks so much for taking the question and congrats on the quarter. Hope you don't mind if I ask kind of a pipeline BD question. You've talked historically about how there's really not a lot of high-quality neuroscience assets that could kind of fit your budget and make it kind of a near to midterm impact on the top line. In the context of that, I guess, how do you think about crinecerfont and what that could do to Neurocrine's scope? If crinecerfont works as well as you hoped, could Neurocrine start to go into the direction of either endocrine, rare disease and really not just be in neuroscience for the foreseeable future? Thanks so much.

Kevin Gorman, CEO

Thanks for the question, Paul. Good morning. Kyle can add to what I would say is, but we do look in the endocrine space quite a bit. As you know from discussions that you've had with Kyle and him speaking at several of your conferences, he and his team look broad and deeply into both neuroendocrinology, neuroscience, and also neuropsychiatry. So it is not an area that we've ignored at all; we are poised to go into if we see assets that meet all of our criteria. Kyle, do you want to add to that?

Kyle Gano, Chief Business Development and Strategy Officer

Yes. Just to add to Kevin's remarks, I think what would be interesting is with positive data with crinecerfont, it does open the door to looking at things that are later stage commercial on the endocrine side, which we haven't done historically. So we know what those opportunities look like, and we await our crinecerfont data.

Tazeen Ahmad, Analyst

Okay. Hi, guys. Thanks for taking my question. Maybe just for giving us a sense of what to expect for focal onset seizure. The top line data that you expect in Q4, what should we expect? And what should we really be comparing that to in terms of the standard of care to get a sense of whether or not your product could have improvements but currently given...

Eiry Roberts, Chief Medical Officer

Tazeen, it's Eiry here. Thanks for that. I think I got all the questions you were breaking up a little bit. But we are very much looking forward to reading out the data from our Phase II proof of concept. It's a dose-finding proof-of-concept study, initial Phase II in focal onset seizures. Three things we're predominantly interested in the context of this study. First of all, obviously, the initial tolerability and safety of 352 in this patient population in adults. The second is to understand the pharmacokinetic profile, which will help us with understanding exposure response and position us well for future dose selection in other trials if we're successful. And the third is obviously the measures of seizure frequency. And we will be looking at seizure frequency comparing from baseline to the primary endpoint. Essentially, we look at the normalized seizure frequency over an 8-week period of monitoring. The absolute change from baseline compared between the treatment and placebo. Also, we'll be interested in the number of patients achieving a 50% reduction in seizures. From this small study, also looking at whether any patients are able to become seizure-free. Looking at the totality of that information will give us an indication of the strength of any signal that we're seeing, and that will position us well for future discussions.

Tazeen Ahmad, Analyst

And is there any kind of minimum amount that you're looking for in terms of improvement in seizure rate that would determine a go, no go?

Eiry Roberts, Chief Medical Officer

And obviously, there have been a fair number of new trials in this area in the recent past that have demonstrated efficacy for new molecules in this space. We'll be interested in understanding that data. But in reality, we'll be focused on the context of our own information to understand the next steps.

Chris Shibutani, Analyst

Hi. Good morning, team. Thanks for taking our question. This is Steven on for Chris. I think historically, your team has been helpful in framing what the guidance range means in terms of some macroeconomic factors and just overall trends you see with your business. So I was wondering if you could frame this $1.77 billion to $1.82 billion range in that context? Thank you.

Kevin Gorman, CEO

Yes, I'd say the guidance range is primarily going to be driven by new patient demand. We had strong new patient demand in the first half of the year. Depending on the outcomes for the second half of the year, that's really going to be what drives that range. It's $50 million. It's going to show a nice sequential step-up in growth for the rest of the year. I'd just say the team is doing an excellent job. From a macro perspective, you always have a bit of room for some disruption. But based upon how our business is operating, it really comes down to getting the continuance of new patient additions, and we feel confident with the market and how it's operating to provide the guidance we provided today.

Anupam Rama, Analyst

Hey, guys. Thanks so much for taking the question. With the Huntington's PDUFA later this month, how are you thinking about the launch curve for INGREZZA in that indication? How do the properties of INGREZZA might shift the market dynamics there? Thanks so much.

Kevin Gorman, CEO

Good morning, Anupam. So yes, we're obviously excited about the opportunity and look forward to the FDA decision coming up in August. The way we're looking at it, the HD Chorea opportunity has significant unmet need. We estimate around 25,000 or so patients in the U.S. with Chorea associated with Huntington's disease. Only 2 out of 10 are currently treated with the only approved medicines, which are VMAT2 inhibitors, the tetrabenazine’s. There's still significant unmet need and opportunity there. We're looking forward to getting the labeling and certainly getting off the ground this year. From a financial perspective, it's not included in our guidance, and 2023 numbers would be modest. But there's still significant opportunity in that patient category, and we're looking forward to being able to help more patients with valbenazine in the not-too-distant future. So stay tuned.

Phil Nadeau, Analyst

Morning. Thanks for taking my question. As we look forward to the CAH pivotal data in early Q4, we're curious to get your thoughts on the adult trial in particular. What is the protocol for reducing steroids in that trial? And what would you consider a clinically meaningful reduction that's likely to support approval and drive use? Thanks.

Eiry Roberts, Chief Medical Officer

Morning, Phil. We've not actually talked about the specifics of the protocol for steroid reduction in that trial. What I will say is that in the adult Phase III trial, there is a protocol that guides clinicians on how to reduce the steroids in the face of the degree of androgen control that each individual patient is experiencing. That protocol is important because the steroid reduction is the primary endpoint of the study and the need to control that rather than have it be in a more real-world setting, which we believe will be used once the drug is successful and if approved. With respect to the clinically meaningful reduction in steroid dosing level, for as we've said consistently from the start of this Phase III program in our interactions and discussions with many stakeholders, including payers, clinicians, and patients, the fact that these patients take higher than physiologically needed doses of steroids for the duration of their life results in significant problems of comorbidities, metabolic disorders, bone issues, growth issues, et cetera. Any reduction in steroids is meaningful for individuals. In the clinical trial, we are obviously trying to reduce the steroids in a protocolized way, and we will get the opportunity very soon when we read out the data to understand what degree of steroid reduction is possible in the face of crinecerfont treatment.

Phil Nadeau, Analyst

Can you remind me, have you disclosed the powering of the study?

Eiry Roberts, Chief Medical Officer

We have not disclosed the powering of the study against that primary endpoint. We believe the number of patients within the trial is predominantly driven by the safety database that's needed to support the registration, and that was in conversations with the agency and regulators, and the trial is adequately powered to address the endpoint.

Jay Olson, Analyst

Hey. Congrats on the quarter. And thanks for taking the question. Can you talk about the geographic scope of Neurocrine and how crinecerfont could potentially globalize your business, especially if you can leverage the Diurnal infrastructure to other assets in your pipeline beyond crinecerfont? Thank you.

Kevin Gorman, CEO

Thanks, Jay. Yes, crinecerfont could globalize Neurocrine. We ran this as a worldwide study mainly based in the United States, Europe. With Diurnal as part of Neurocrine now, and with this indication being driven by centers of excellence throughout the United States, which we'll commercialize here, it's also driven by centers of excellence throughout Europe. We see this as a good entry point for our commercial operations in Europe. We look to do a worldwide filing on this and commercialize both in the U.S. and Europe.

Leon Wang, Analyst

Hi. Congrats on the quarter. This is Leon Wang on for Carter. A question on BD. Given Dr. Robert is going to retire in 2025 and the successor hasn't been announced yet, would you look to fill that position or have better color on that position before doing any additional BD? Can you give any additional details on where you are in that process? Thanks.

Kevin Gorman, CEO

Thanks, Leon. What I'd like to say is that when I rejoined Neurocrine approximately 6 years ago, we had 2 clinical programs going on at Neurocrine. We now have well over a dozen programs going on at Neurocrine. Several of them are late-stage Phase III programs, nearly a dozen mid-stage programs. Eiry has built an excellent organization here, allowing for scale as these programs move forward and others are added over time. You rarely get what Eiry has given us, which is 2 full years of notice here. She is highly involved in our efforts to look for her replacement if such a thing exists, and she'll be here for a really good period of time to make the transition as efficient as possible.

Marc Goodman, Analyst

Yes. Good morning. Eiry, in the past, you've talked about how you've got the M1, you've got the M4, you've got an M1 M4, and you're going to be moving all three of them forward. I was just curious about the strategy there, obviously, in the press release that talks about initiating Phase I for the M1 and 4. But I was curious about kind of the package and the whole franchise that you're looking at. And if you're going to run a blood pressure study with each of these or have you yet? Thank you.

Eiry Roberts, Chief Medical Officer

Marc, thanks. There's a lot of questions in there. Let me start just at the top. One of the things that really attracted us to the opportunity to partner with Sosei Heptares was the fact that they had a portfolio of very selective different candidates that we could consider bringing into the clinic. It is important, given the potential importance of muscarinic pharmacology for us to explore the differential pharmacology across these selective molecules. With that said, our primary focus now is on delivering data for 568, which is our M4 selective agonist currently in the schizophrenia treatment of acute psychosis trial. Enrollment is going very well in that trial in the United States. The molecule that I referred to earlier, 570, is the second of the candidates that we have and are progressing. That is an M4/M1 dual agonist. This opens up the opportunity for us to look more broadly across different indications. We haven't finalized our indication selection yet there. But as we move into Phase I and understand the profile of that molecule, we'll be able to say more about that. We do have other molecules behind that that we intend to bring into the clinic in due course. With respect to cardiovascular profiles, I think we need to see in the clinic first. I can't comment about whether blood pressure monitoring will be required until we've seen the clinic data.

Brian Abrahams, Analyst

Hey, guys. Good morning. Thanks for taking my question. You reported another good growth - another good quarter of growth for INGREZZA. Can you talk about the inventory dynamics embedded in that? And what you're seeing on the ground with regards to market share versus overall market growth with your and others' efforts to identify and diagnose TD patients? Where do you see that going in the remainder of this year into next? Thanks.

Kevin Gorman, CEO

So the bleed did occur as anticipated, but I'd say our results were largely driven by new patient additions that we saw both in the first quarter and the second quarter. It's a testament to the team, both medical and commercial teams and how they're engaging with our customers; reflective of the strong market we have here with the developing TD market. So I'm going to hand it to Eric to provide a few more comments.

Eric Benevich, Chief Commercial Officer

Yes. We're really happy with the growth we've seen in the first half of the year. Our raised guidance reflects our optimism for the second half. Our commercial team is firing on all cylinders right now, and the market is growing nicely, but I'd say that INGREZZA is growing even more. We've actually gained share over the past few quarters. We continue to be optimistic about continued growth. The vast majority of patients with TD remain undiagnosed and untreated. We're focused on bringing this important medicine to those patients.

Brian Skorney, Analyst

Hey. Good morning, guys. Thanks for taking my question. I want to ask about any sort of seasonality to consider going into 3Q. I know 2Q is historically a big quarter for INGREZZA, and there tends to be a little less sequential growth in 3Q and then a bigger sequential jump in Q4. So just looking for any guidance as we think about the remainder of the year with that historical context and how we model out the next few quarters? Are there any channel dynamics to consider price changes, etc.?

Matt Abernethy, CFO

Yes, Brian, I'll try to address the questions here. The first half of the year had tremendous growth. The second half of the year, we expect similar growth. If you look at the range, it's $920 million to $970 million type INGREZZA performance here in the second half of the year, and we do expect continued sequential growth, largely driven by new patients. Q3 has had a touch of seasonality in the past, but it's always difficult to predict. We anticipate our net revenue per script to be around $5,600, which is a couple of percent increase compared to 2022. So all feels stable from a net price perspective. It really comes down to executing and driving new patients. The team feels very good about how the market is evolving, how we're performing, and we're looking forward to the second half of the year.

Unidentified Analyst, Analyst

Good morning. This is Avi on for Akash. Historically on M&A, I think you've commented that the high end of the range you've considered was around $4 billion. But over the next few years, I think INGREZZA will generate more than enough free cash flow to go beyond that point. What's the gating factor for doing M&A beyond that $4 billion landmark? Would there be any appetite on your teams to pursue a merger of another commercial stage CES company? Thank you.

Kevin Gorman, CEO

What I'd say right now is that we have a very good growing franchise within INGREZZA, and we're adding another indication to it. At the same time, we have an outstanding pipeline with multiple readouts coming in the rest of this year and early next year. So is Neurocrine driven to doing a large acquisition? No, but we look at everything frequently. We have a great opportunity for substantial organic growth here at Neurocrine, and that's our focus right now.

Jeff Hung, Analyst

Thanks for taking my question. Can you talk about the potential advantages of INGREZZA as adjunctive treatment in schizophrenia over others approved for the indication? Thanks.

Eiry Roberts, Chief Medical Officer

Thanks, Jeff. First of all, I don't believe there are currently any adjunctive treatments actually approved in the space of schizophrenia. This would be an opportunity to have a first approved medication. We are excited about the 2 pivotal Phase III studies we have ongoing to evaluate valbenazine as a potential adjunct for patients with schizophrenia who fail to get adequate response from currently available treatments. It's important to emphasize the unmet need that exists there. The majority of patients do not get full effectiveness from currently available treatments. If they do get an efficacy response initially, many of those patients relapse and suffer from acute psychotic episodes later on in the disease. With respect to valbenazine, we are confident in the safety and tolerability of that based on our tardive dyskinesia program. The extensive database for patients who have received antipsychotics and valbenazine treatment together, combined with preclinical data showing the addition of valbenazine to antipsychotic background treatment results in a synergistic effect. We do not have Phase II data for the combination in the clinic. Due to challenges in psychiatry trials with failed trials and inappropriate readouts, we elected to go straight into fully powered pivotal trials.

Myles Minter, Analyst

Hi. Just on the CTA for 570 to M1/M4 dual agonist here. Are you running that Phase I with any sort of anticholinergic components to mask nausea and vomiting that's been seen with that mechanism, just obviously referring to the Xanomeline experience at Eli Lilly. Just curious if there's an additive compound in that CTA? Thanks.

Eiry Roberts, Chief Medical Officer

Yes. I don't want to comment too much on the specifics of the design of the Phase I program, but the reasoning for the Xanomeline requirement of additional anticholinergics is because of the peripheral side effect profile that seems to target M2 and M3. The anticholinergic then knocks out that peripheral effect. We have highly selective centrally penetrant agonists. As such, we are developing them in that fashion, so I'll probably leave it at that.

Danielle Brill, Analyst

Hi, good morning. Thanks for the question. I'm curious, I believe your competitor is also developing their CRF1 antagonist for PCOS. Is this an indication of strategic interest for you and curious why or why not? Thanks so much.

Kevin Gorman, CEO

Actually, not at this time. We're following their data. PCOS is not an indication we're focusing on right now.

Evan Seigerman, Analyst

Hi guys. Thank you for taking my question. I'd love to hear a little more about the expansion of INGREZZA into the long-term care market. We didn't hear much about it. And I know that's a unique setting. So maybe just some more on that and how that could help support growth this year or next year? Thank you.

Kevin Gorman, CEO

We're excited about the opportunity to help more patients in long-term care. This is a segment we were attracted to at the time of launch with INGREZZA back in 2017, but we didn't have the capacity to take that on top of outpatient psychiatry, community mental health, and outpatient neurology. Last year, just a little over a year ago, we launched our efforts into long-term care with a dedicated team. What we've seen so far is a lot of really good progress and strong growth. We estimate that about 10% to 15% of the total TD population resides in various residential care facilities. So it's early days yet in terms of that business segment. Our neurology and psychiatry segments are more established than LTC. But all signs are positive, and we continue to be very optimistic about the opportunity there going forward.

Laura Chico, Analyst

Good morning. Thanks very much for taking the question. Back to INGREZZA, a commercial question. I'm wondering if you can offer any comments on the duration of treatment that people are experiencing with INGREZZA, how long they are staying on board. Just curious how that has been impacting, for example, the increase in guidance here? Has there been any improvements or increases in the duration of treatment? And have you quantified the number of patients that were on therapy? Thank you.

Kevin Gorman, CEO

I'll take your last question first. No, we haven't disclosed the number of patients on therapy, though it continues to grow every quarter. We've seen strong additions in terms of new patient starts since we came out of the COVID lockdown environment. In terms of persistency, that's been strong since the early days of the launch. We've looked at this serially since 2017, and what we've seen is that patients are staying on treatment longer than expected prior to launch and longer than seen with our underlying psychiatric meds. Although we haven't given specific numbers for average duration of treatment, persistency compares favorably to those psychiatric meds these patients are taking.

Sumant Kulkarni, Analyst

Good morning. Thanks for taking our question. Could you remind us as to the nuance that drives the primary endpoint being glucocorticoid reduction at week 24 for adult patients, while its serum A4 in pediatric patients with glucocorticoid being a secondary endpoint at week 28? What could this difference mean in terms of your ability to drive successful regulated discussions with pediatric and adult patients?

Eiry Roberts, Chief Medical Officer

Thank you, Sumant. Both measures are important in the management of congenital adrenal hyperplasia in the pediatric and adult populations. The choice of primary versus secondary endpoint reflects the ability in a clinical trial setting and the heterogeneity of the population in demonstrating that outcome. From an adult perspective, androgen control is extremely important. The primary mechanism of action for crinecerfont is to act on the HPA axis and reduce androgen levels. It's possible to protocolize the steroid reduction and look at steroid dose as a primary endpoint due to the different physiological changes in the pediatric population. For pediatric patients, the main endpoint is the 4-week androgen control, while there is a more real-world assessment of steroid reduction, measured out to 28 weeks. Unsurprisingly, both endpoints become important in the conversation around how this medicine could be used in patients out in the field.

Mohit Bansal, Analyst

Sorry, this is Serena on for Mohit. Thanks for taking the question. I wanted to ask more about the expected launch in Huntington's Chorea. Can you talk about any differences versus tardive dyskinesia in expectations for compliance rates or duration, and if you expect to bolus the patients waiting for an autistic alternative or new patients to be switched from the market?

Kevin Gorman, CEO

Yes, let me start with the last part of your question and work forward. We're excited about the opportunity. We believe we have a differentiated product. We're eagerly awaiting the PDUFA date and a favorable outcome from the FDA, and what those labeling look like. We haven't been out there talking about valbenazine in the HD community, so we will really be introducing valbenazine as a new treatment option to the movement disorder neurologists and general neurologists treating these patients, and obviously to the HD patient community as well. Initially, I believe that uptake will occur in newly diagnosed patients with Chorea or those who've had Chorea for some time but have been reluctant to be treated with existing treatment options. We don't expect a lot of switching in this market; we haven't seen that in the TD market either. The product attributes that make INGREZZA attractive in TD, such as once-daily dosing without complicated titration and low rates of side effects, translate well to the HD Chorea opportunity. We're looking forward to making a new treatment option available because one is certainly needed.

David Amsellem, Analyst

Thanks. Regarding crinecerfont, this is more of a commercial question: to the extent that the product works, do you think new starts are going to be driven in the pediatric setting, given the obvious pitfalls of a high steroid burden in peds as it relates to growth? Is that the right way to think about this market and uptake of the drug? Or do you see a real opportunity in adults as well? Thank you.

Kevin Gorman, CEO

Yes. I'll start by just saying we need to see the data and get approval from the FDA. With that said, I see a significant opportunity across all patient segments because there's no significant medical advances for the CAH opportunity in decades. The standard of care remains glucocorticoids. There are significant issues associated with high-dose GC treatment. If you look at the different patient segments, it’s clear that both younger and older patients will benefit from crinecerfont. We're looking to generate data and bring a new approach to treating CAH that this population deserves.

Ash Verma, Analyst

Hi. Thanks for taking my question. I wanted to ask about IRA implementation. What are you assuming with respect to how the commercial channel may respond to Medicare negotiating the price down? Do you have conviction that your commercial pricing is insulated in a post-IRA implementation environment? Thanks.

Kevin Gorman, CEO

I've said all along that IRA is going to be a moving target, but we'll carefully monitor what's happening, especially as this September starts with the first group of companies that will be listed for negotiation. I'd say for Neurocrine, while it impacts the entire industry, we get protected for quite a while due to both provisions for small biotech companies. First, the specified small manufacturer phase-in for the new Part D program that phases in discounts for us over 7 years starting in 2025. Secondly, we expect to qualify for the small biotech exemption, which delays the potential for negotiation until 2029 and it's phased in over 2029 to 2031. We will monitor this closely as we move our business forward.

Yatin Suneja, Analyst

Thank you. Just a quick question on the revenue per script. Could you comment on how it trended from Q1 to Q2? How should we think about Q3, Q4 and maybe where you expect to end? Regarding guidance, Chorea is not included; at what time point might you start incorporating that into the guidance? Thanks.

Matt Abernethy, CFO

Yes, on the guidance for HD front, it's not incorporated, but we don't expect it to be too material this year. I would expect it to be incorporated as we think about 2024. From a net revenue per script perspective, as is typical, we had a few percentage improvement from Q1 to Q2. As you've seen historically, it remains consistent from here. Nothing to flag other than we expect net revenue per script to be around $5,600 this year, and access remains very good. Overall, I wanted to highlight our strong profit profile during the quarter, with non-GAAP earnings reflecting strong profits despite a nonrecurring, noncash stock-based compensation charge impacting our GAAP earnings. We did not increase GAAP operating expenses but reduced our non-GAAP operating expenses. Therefore, our profit profile remains very strong, and we're seeing nice operating leverage in the business.

Unidentified Analyst, Analyst

Good morning. This is Avi on for Akash. Historically on M&A, I think you've commented that the high end of the range you've considered was around $4 billion. But over the next few years, I think INGREZZA will generate more than enough free cash flow to go beyond that point. What's the gating factor for doing M&A beyond that $4 billion landmark? Would there be any appetite on your teams to pursue a merger with another commercial stage CES company? Thank you.

Kevin Gorman, CEO

What I'd say right now is that we have a good growing franchise here with INGREZZA. We're focused on substantial organic growth and we have numerous late-stage programs; thus it's not a priority to drive a large acquisition currently.

Operator, Operator

And we will take our next question from Brian Abrahams with RBC Capital Markets. Your line is open.

Kevin Gorman, CEO

Thank you very much, and thank you for all your questions this morning. I'm just going to close with the fact that we've - some of you may become too used to INGREZZA growing quarter after quarter. While we see growth continuing, we never take it for granted. This is a tremendous amount of hard work from our entire sales, marketing team, the medical team, and all the other support teams in the field. We continue to bring this medicine to more patients suffering from TD due to those hard efforts. There's no slowdown in sight, and we are fortunate to have a product like this. Going forward, there are many important potential medicines in our pipeline. I'm not sure any other company has the number of Phase II and Phase III trial readouts coming in the next 6 months as we do. Looking forward to discussing all of them with you very soon. This company is hitting on all cylinders now, and we're always looking for ways to improve. I couldn't be more pleased with how the company is operating at this point. With that, I'll sign off and look forward to talking to all of you in the near future.

Operator, Operator

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