Neurocrine Biosciences Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 7, 2024

There are 17 speakers on the call.

Operator

Good day, and welcome to Neurocrine Biosciences Year End and Fourth Quarter Results Call. At this time, all participants are in a listen only mode. Later, you will have the opportunity to ask questions during the question and answer session. Please note today's call will be recorded and I'll be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Todd Tushla, Vice President of Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you, and a good Wednesday morning to everyone. Welcome to Neurocrine Biosciences 4th Quarter and Full Year 2023 Earnings Call. Joining us today are Kevin Gorman, Chief Executive Officer Matt Abernethy, Chief Financial Officer Eiry Roberts, Chief Medical Officer Eric Benovich, Chief Commercial Officer and Kyle Gano, Chief Business Development and Strategy Officer. During the call, we will be making forward looking statements. These statements are subject to certain risks and uncertainties and our actual results may differ materially.

Speaker 1

I encourage you to review the risk factors discussed in our latest SEC filings. Today's prepared remarks will be a bit longer in duration versus prior earnings calls As we do have a lot of ground to cover, I can assure you that we will do our best to address all of your questions when we get into Q and A. So now I'll turn the call over to Kevin.

Speaker 2

Thank you, Todd, and good morning, everyone. So we had a great 2023. I said the same thing about 2020 2, and it was great. I said there are very few years you get like 2022 and we then had one of those years in 2023. Both of those years were not without their ups and downs, but on the whole, the business performed exceptionally well.

Speaker 2

I mean, looking at 2023, again, incredible continued growth for INGREZZA in its 6th year on the market. Expansion of INGREZZA intellectual property out to 2,038, approval of INGREZZA in another indication in Huntington's disease. We also had creneser front Phase 3 data that beat even our high expectations for that and a clinical pipeline that grew more in that 1 year than we've ever experienced at Neurocrine in the past, and then a preclinical pipeline that is growing quite a bit. Now we expect an equally successful 2024. And I'm not going to go into the details of that because my colleagues in the room are going to talk about that.

Speaker 2

But right now, let's take a snapshot of 2023 from a financial perspective, from Matt,

Speaker 3

and he will also give you how we are viewing 2024. Matt? Thanks, Kevin. Good morning. 2023, what an incredible year.

Speaker 3

Record INGREZZA sales growth, positive Kineser font results and an advancing R and D pipeline all position us for continued progress for years to come. Part of jumping into our 2024 financial guidance, I want to provide a few comments associated with our 2023 financial performance. 1st, INGREZZA sales performance. During the Q4, INGREZZA sales were $500,000,000 reflecting continued sequential growth driven by new patients, slightly offset by gross to net dynamics. 2023 INGREZZA sales finished near $1,840,000,000 reflecting over $400,000,000 in year over year growth.

Speaker 3

Next, one of our goals for 2023 was to demonstrate SG and A financial leverage. As you can see, we delivered approximately 400 basis points and 300 basis points of SG and A leverage on a GAAP and non GAAP basis respectively. We expect continued progress in 2024, which I'll discuss shortly. Finally, we generated over $600,000,000 of cash flow in 2023, reflecting strong non GAAP net income, partially offset by $175,000,000 in business development investment. Turning to 2024, this will be another pivotal year for Neurocrine with growing ingress of sales, preparing for the commercial launch of Kinesar Fund and the many activities associated with advancing our R and D portfolio, which were highlighted at the recent Analyst Day.

Speaker 3

We believe investing in these areas will continue to drive long term shareholder returns. Now on to our 2024 financial guidance. 2024 INGREZZA net sales guidance is $2,100,000,000 to $2,200,000,000 reflecting strong underlying demand and an improving gross to net resulting in over $300,000,000 of sales growth or 17% at the midpoint. As always, we expect seasonal dynamics to play out similar to what we've seen in previous years. 2024 SG and A GAAP operating expense guidance is $930,000,000 to $950,000,000 or 43% of total revenues at the midpoint and $830,000,000 to $850,000,000 or 39% of total revenue at the midpoint on a non GAAP basis.

Speaker 3

These costs reflect continued investment in INGREZZA and also an incremental $50,000,000 to prepare for the potential Kineservant launch as Eric will discuss shortly. Even with the investment in Kinesser points in SG and A GAAP and non GAAP leverage at the midpoint of the range. As you develop your models, we do have a seasonal nature to our spending, Specifically a step up in Q1. 2024 R and D GAAP operating expense guidance is $645,000,000 to 6 $75,000,000 or 30 percent of total revenue at the midpoint and $570,000,000 to $600,000,000 or 27% of total revenue at the midpoint on a non GAAP basis. These costs reflect investment in our ongoing 17 clinical programs, including our crenecervant studies, muscarinic programs and the early stage pipeline highlighted at Analyst Day.

Speaker 3

Note this guidance range does not include any partnership milestone payments until they are deemed probable. A few other financial metrics to note. We expect cost of revenue to be 2% of sales. Stock based compensation is expected to be $175,000,000 with $100,000,000 in SG and A $75,000,000 in R and D. And we expect our non GAAP effective tax rate to be around 23%.

Speaker 3

As I reflect about the journey we've been on over the past 5 years, it is quite remarkable. With INGREZZA now trending above $2,000,000,000 in sales, the next leg of growth to our story with Kineservant In advancing pipeline and a strong financial profile, we are well positioned for the future and feel quite fortunate. With that, I now hand the call over to Eric Benovich, our Chief Commercial Officer. Eric?

Speaker 4

Thanks, Matt. 2023 marked another stellar year for INGREZZA and included several important milestones for the franchise. This includes the continued increase in diagnosis treatment rates for patients with tardive dyskinesia. The addition of a new indication for Korea associated with Huntington's disease and the ANDA litigation settlement that provides exclusivity for 14 more years out to 2,038. 2023 was our 6th year in the market since launch.

Speaker 4

While full year sales growth of nearly 30% is impressive, That growth speaks volumes about the continued unmet need in both TD and HC Korea. Looking ahead, we still have a tremendous opportunity to help many more patients. While we continue to make steady progress, 2 thirds of the approximately 600,000 TD patients in the U. S. Remain as yet undiagnosed.

Speaker 4

And for the approximately 20,000 HD patients with moderate to severe chorea, 80% are still not being treated with a VMAT2 inhibitor, the only FDA approved class of medicines for this indication. This year, our commercial and medical teams will continue to educate and motivate healthcare providers to screen, diagnose and treat TD and Hc Korea patients. In addition, We'll continue our efforts to reach patients and caregivers to help them recognize their involuntary movements as possibly TD or HC Corea and encourage them to talk with their healthcare provider about diagnosis and if appropriate treatment with INGREZZA. Although we have made great progress these past 6 years, Majority of the opportunity remains ahead of us. The 2024 INGREZZA sales guidance range of 2.1000000000 $2,200,000,000 is driven primarily by the pace of new patient starts in TD and to a smaller degree in HD, where INGREZZA is still in its early launch phase after the approval and launch towards the end of last year.

Speaker 4

Specific to TD, we anticipate robust growth across all three business segments of psychiatry, neurology and long term care. Access to INGREZZA remains strong As exemplified by the fact that regardless of formulary status, greater than 80% of written scripts for INGREZZA get filled and the average out of pocket cost is less than $10 Overall, I'm looking forward to another solid year of growth for the franchise as we continue to build these markets. At this time, we're going to mix things up a little bit versus our normal cadence for prepared remarks. My colleague, Doctor. Ivy Roberts, our Chief Medical Officer and I We're going to provide a Kineser Font update.

Speaker 4

We thought it important to highlight the integrated efforts between our respective organizations to prepare an anticipated 2025 launch. Eri, why don't you start?

Speaker 5

Thanks, Eric, and good morning, everyone. Let me start by reminding everyone of the incredible challenge congenital adrenal hyperplasia patients face today. For these patients, their only real option, lifelong treatment with high dose glucocorticoids is both entrenched and flawed. In this paradigm, GCs are tasked with both replacing the missing cortisol and suppressing the excess androgens. Patients therefore face the difficult choice of either taking long term high dose GCs to reduce excess androgens and thus face the long term complications of GC exposure such as hyperglycemia, dyslipidemia, cardiovascular disease, osteoporosis, psychiatric disturbances or immunosuppression, Or they can try to minimize their GC exposure and live with the consequences of excess androgen production, such as advanced bone age, precocious puberty, short adult stature, irregular menstruation or infertility.

Speaker 5

These are the difficult trade offs patients with living with CAH must make every day. With the impressive efficacy and tolerability data from the adult and pediatric registrational studies for connoissepont, we hope to provide potentially new paradigm for these patients. To this end, combined efforts between Neurocrine's medical and commercial organizations are well underway as we prepare to bring crenequefont to CAH patients in the U. S. And in key European markets.

Speaker 5

Later this year, we look forward to sharing additional safety and efficacy data from the registrational studies in peer reviewed journals and scientific conferences. In addition, our medical affairs field team are highly engaged with thought leaders in the field to develop the extensive educational programs necessary to support launch, while our health outcomes team works to generate and publish critical data necessary to characterize the burden of disease in CAH and support the value proposition of crenecipond as an effective treatment for patients living with congenital adrenal hyperplasia. Our key focus now within clinical development and regulatory is on the completion of the new drug application for crenecifant in adults and pediatrics with the FDA. Granted breakthrough therapy designation for crenecephant at the end of last year. This designation serves as an acknowledgment The serious and life threatening nature of CAH highlights the significant unmet need that exists in the treatment of the disease with no approved treatments for the past 60 plus years and identifies crenezepont as a potentially valuable treatment for patients with CAH.

Speaker 5

While we are hopeful that the granting of breakthrough designation for crenezepond will lead to priority review, That decision ultimately rests with the FDA. So we are moving forward in a way that proactively prepares us for all eventualities, including the possibility of an advisory committee. Eric will now cover the pre approval activities within the commercial organization.

Speaker 4

Thanks, Eiry. This is an exciting time for our commercial team as we prepare for the launch of creneserfant. If approved, creneserfant would be not just the first ever CRF antagonist would also be the 1st medication specifically approved for the treatment of CAH. With creneserfon, we're presented with the opportunity to build a new market. Just like the opportunity we had 7 years ago when we set out to launch INGREZZA as the first medication approved for TD.

Speaker 4

Building a market for Kineserv Font in CEH is a privilege. However, much work remains ahead of us. 1 of our primary areas focus in 2024 will be education of all stakeholders in the CAH community. This educational effort will focus on disease state awareness, challenges with currently available treatment strategies and the recognition of the need for better treatment options. Given the challenges of managing CAH that Eiry highlighted and the extremely impressive efficacy and tolerability data generated from our Phase 3 studies, We're excited for the potential of creneserfon to dramatically change the status quo.

Speaker 4

We bring forward the possibility of bringing androgens under control, while simultaneously reducing GC dose to more replacement levels. In the commercial organization, we're ramping up educational efforts directed towards patients, Parents, family members and endocrinologists to help the CEH community better understand the nature of the disease to more fully understand the current factory treatment trade offs, between suffering from excess androgen production or the complications of chronic treatment with high dose glucocorticoids. In a compliant way, we plan to set the table for a new and simpler approach to treating CAH that doesn't require the current challenging trade offs. It will take some time to broadly reach and educate the CEH patient community, but the good news is that we have already started that process. As we prepare for an expected launch in the U.

Speaker 4

S. In 2025, our teams are excited to build another market and bring a potential new to CEH patients who sorely need a better option to manage their disease. Now I'll hand it back to Eiry.

Speaker 5

Thank you, Eric. As we begin the year, Neurocrine's pipeline is as broad and diversified as it has ever been in our 32 year history. Importantly, 2024 marks a catalyst rich year. Our Phase 2 pipeline features several data readouts this year, all of which remain on track for delivery. This includes NBI-eight forty five, the AMPA potentiator for major depressive disorder with data in the first half, lubodaxastat, the DAA0 inhibitor for the cognitive impairment associated with schizophrenia in the second half and NBI-five sixty eight, an orthosteric M4 agonist for treatment of psychosis in schizophrenia, also reading out in the second half.

Speaker 5

In addition to these data readouts, we are currently initiating a Phase 2 efficacy study For NBI-seven seventy, the oral NMDA NR2B negative allosteric modulator as a potential treatment for major depressive disorder. In the early stage pipeline, we have made remarkable progress over the recent months with 5 new programs entering Phase 1 development. 4 of these programs target the muscarinic system And together with NBI-five sixty eight, we believe this represents the broadest and deepest muscarinic pipeline of any company in our industry. These Phase 1 molecules provide the opportunity to explore the potential value of differentiated selective agonism at M1 and M4 receptors, while always excluding agonism at M2 and M3. We have the tools to differentiate these molecules in early clinical development and thus determine which neurological and psychiatric disorders might best benefit from this differentiated cell activity.

Speaker 5

In addition, our Phase 1 muscarinic portfolio includes an internally covered selective M4 antagonist, NBI-nine eighty six, targets for the treatment of movement disorders. The final new entry in our Phase I portfolio is NBI-eight ninety, a next generation VMAT2 inhibitor targeting a broad range of potential neurological and neuropsychiatric diseases. I'm extremely proud and enthusiastic about the prospects of today's clinical pipeline and look forward to continuing to partner closely with Jude and his outstanding research and preclinical development team to bring the next generation of innovative small and large molecules from research into the clinic over the coming years. I'll end here and hand it back to Kevin. Kevin?

Speaker 2

Thank you, Eiry. So we've gone a little longer This morning with our opening remarks, mainly due to the fact that there was a lot that we ended year on and there is a lot going on here this year. So, we're going to do our best to get through as many of your questions as possible before the top of the hour. So operator, could we open it up for the first question?

Operator

Our first question will come from Paul Matteis with Stifel. Please go ahead.

Speaker 6

Hey, good morning. Thanks so much for taking my question. I appreciate it. I wanted to ask about the muscarinic readout coming up in the second half of this year. The study design includes a number of different dose arms.

Speaker 6

So I was just curious if you could expand upon how you selected those dose arms and how confident you are that you're in the right range. And then because the study has a number of dose arms and isn't all that big, are you looking at success in this readout is hitting a P value or are we more looking at A dose or 2 with pants changes that look similar to Umbracadine and

Speaker 7

CAR XT with acceptable safety? Thanks so much.

Speaker 5

Paul, thanks very much. Thanks for the question. So this is a dose finding study, as you alluded 24, NBI-five sixty eight and it is an adaptive design that explores several different dose levels. And so in terms of the sizing and powering of the study, we are more looking for an effect size that is similar to what has been seen before and also potentially a somewhat differentiated tolerability profile. It's not a trial that is powered for individual P values for different arms there, But it is a reasonable sized large dose finding study with it will have over 200 patience ultimately, and we look forward to reading that out in the second half of this year.

Speaker 7

Okay. Thank you, Ira.

Operator

Thank you. Our next question will come from Tazeen Ahmad with Bank of America. Please go ahead.

Speaker 8

Hi, guys. Good morning. Thanks for taking my question. Mine is on the Coria launch this year. Wanted to get some more color of What type of contribution you're expecting from that launch for INGREZZA sales this year at least directionally?

Speaker 8

And then I also wanted to follow-up on Eric made in the prepared remarks that I think you said 80% of Coria patients don't receive any therapy today. But Oceta has been on the market for several years. I was just curious as to why you think they haven't been able to get bigger share in the years that they've been in the market? Thanks.

Speaker 4

Yes, good morning. So I'll take the second question first. What we've seen prior to the launch and then now that we're in the market is that the majority of patients with Huntington's Korea either don't get treated at all for their uncontrolled movements or, they get treated with an antipsychotic It may get some partial benefit. Only about 20% of patients with HT Crea get treated with a VMAT2 inhibitor. And what our How market research tell us, what the prescribers tell us is that, the deficiencies with the tetravenazine products have led to a fairly high rate of patients not getting treated, either because of perceptions of complicated dosing and titration, concerns about side effects or in some cases, out of pocket cost.

Speaker 4

And so the profile of VINGREZZA in Huntington's Korea has a lot of the same attributes as the profile in TD and is the reason that it's the number one most prescribed VMAT2 inhibitor. In terms of simple dosing, No complex titration, well tolerated. And as I mentioned in my prepared remarks, out of pocket cost is less than $10 for most patients. And We intend to grow not only by growing within the VMAT2 treated class, but by expanding the class over time. And to do that, we need to encourage more patients and more providers to be treated altogether within that category of HCC.

Speaker 4

The first part of your question was really around the relative contribution. It's small. And the reason that I say that is that twofold. 1, we're still just getting off ground. We're only about a quarter into the launch now, and we're introducing our data to the Huntington's treating community in neurology.

Speaker 4

But the second reason is that it's a rare disease. It's much smaller patient population thankfully than tardive dyskinesia. And so for every patient with Huntington's Korea, there's about 40 patients with TD out there. And ultimately, TD is and will continue to be the main growth driver for our INGREZZA franchise.

Speaker 8

Okay. Thanks, Eric. Thank

Operator

you. Our next question will come from Brian Skorney with Baird. Please go ahead.

Speaker 7

Hey, good morning everyone.

Speaker 9

Thank you for taking my question.

Speaker 10

Matt, I was hoping maybe you can

Speaker 7

help us think about the initial build out of structure for CAA launch and how to think about sort of the SG and A guidance for this year versus what's fully loaded? And then maybe you can just kind of give us some high level thoughts On what a cadence of launch would look like, do you see this as a market with high levels of patient awareness and building demand? Or is this more of a cadence of patients sort of seeing endocrinologists on a yearly basis and that's sort of a point of discussion for a new therapy happening.

Speaker 3

Yes. So from a financial perspective, we are going to invest around $50,000,000 this year just to prepare for that launch in 2025. So From an SG and A perspective, if you look at it holistically for the company, showing very nice leverage this year and even including that $50,000,000 investment. So Eric can get into the details of the build, but we do expect to have the sales force generally in place by the middle of this year to start educational initiatives and then that will set us up for a launch in 2025. Eric, do you want to comment on the cadence of launch?

Speaker 4

Yes. As I mentioned in my prepared remarks, 2024 is the year of preparing for the launch, but it's also the year of preparing the market for Kineserv Font. Until that end, we're going to start the process Reaching and educating all the key stakeholders in the CAH community. So patients, family members, and endocrinologists. And part of it is educating them on the nature of the disease.

Speaker 4

The challenges that Eiry highlighted in her prepared remarks of living with CAH on a day to day basis and the limitations of current treatment with high dose glucocorticoids. As Matt mentioned, we are in the process of scaling up and hiring sales force and we're going to deploy that team a few quarters in advance of the anticipated PDUFA date. And they'll be getting out there, they'll be doing disease state education, they'll be meeting customers, profiling customers, etcetera, to really set us up for a very strong launch that we expect in 2025.

Operator

Thank you. Our next question will come from Phil Nadeau with TD Cowen. Please go ahead.

Speaker 11

Good morning. Congratulations on a successful year. A couple of questions for Matt from us based on the 2024 guidance for INGREZZA. First Matt, you mentioned that the gross to net would improve in 24, can you give us some idea of what the net price you're expecting for INGREZZA is? And then second on the revenue guidance, The bottom end of the 2024 revenue guide implies only about 5% growth versus the Q4 run rate for INGREZZA.

Speaker 11

So we're curious to know a bit more about the patient dynamics that could lead to the relatively modest growth versus the 10% that's assumed at the high end? Thanks.

Speaker 3

Yes. And thanks for the question, Phil. Always good to hear from you. As we think about 2024 and overall guidance, it really comes down as it does every year to what happens in the Q1 with patient retention and then also new patient generation. So the guide that we provided today really takes into account what we see today.

Speaker 3

But we of course are always going to work to try to drive as much new patient growth as possible throughout the year and we'll Of course, reassess our guidance when we get to the middle of the year consistent with past years. From a net price perspective, Factoring all the nuts and bolts of price increases and contracting trade offs, we would expect that net revenue per script will be somewhere over $5,800 net revenue per script. And just as a reference point to remind you, we did land around $5,600 net revenue per in 2023.

Speaker 6

Very helpful. Thank you.

Operator

Thank you. Our question comes from Brian Abrahams with RBC Capital Markets. Please go ahead. Hey guys, thanks for taking my question. You mentioned the potential to prepare for an AdCom for creneserfond.

Speaker 10

I was wondering if

Operator

you could maybe speak about what topics you might expect to be discussed there. And I guess how a potential AdCom could tie in to laying the groundwork for payers and any discussions you may be having as well as furthering the educational efforts that you're going to be initiating this year around the market? Thanks.

Speaker 5

Okay. Thanks. So let me take the second part first. I mean, in terms of the educational efforts, I think it's really important given the fact that crenequefont will be the first potential medication to come forward into this space in the last sort of 60, 70 years that whilst we have obviously a group of experts who are Incredibly familiar with the current options that they have available for helping this patient population. The opportunity To fundamentally change the paradigm of treating this disease, I think is one that's going to require us to engage heavily in educating clinicians, educating the patient population and families and everyone else around those patients.

Speaker 5

And so we will be We are investing heavily in that already and both on the medical side and the commercial side, obviously, in a compliance way ahead of our hopeful approval. With respect to the question around the AdCom, I mean, the reason we talk about an AdCom is just because of what I said earlier, really, there hasn't been a medication in this space for so many years. And in addition to that, obviously, it may be an opportunity for the FDA to engage with experts in the field outside of those that have worked on the program. We don't have any particular reason to believe that an ADCOM would be necessary based on our data, we're incredibly impressed with the data that we were able to generate from our Phase III program and believe that our NDA will be very clear and articulate both the benefit and tolerability of crenequefort. And so we don't have particular topics we're thinking about.

Speaker 5

It's just In order to be prepared, we're obviously making sure that that's in place in the event that the FDA decides to go down that route.

Operator

Thanks,

Speaker 10

Henry.

Operator

Thank you. Our next question comes from Chris Shibutani with Goldman Sachs. Please go ahead.

Speaker 7

Hey, team. This is Steven on for Chris. Thanks for taking our question. I think Eric mentioned in the prepared remarks that You expect growth from all three channels of your commercial organization with regards to INGREZZA this year. So I'm just curious if you can speak about development and progress points made in the long term care channel and how meaningful we should expect revenues from that channel to be in 2024?

Speaker 7

Thank you.

Speaker 4

Yes. So all three segments of our business are growing nicely, as I mentioned. Psych continues to drive the majority of the opportunity because that's where the majority of the patients are being cared for with TD. Neurology and LTC are also doing quite well. And at this point, the contribution from each is pretty similar in terms of our overall business.

Speaker 4

So, LTC is the newest segment. As I've mentioned before, it's probably the least developed segment, because we really haven't been in there as long, educating the stakeholders, driving screening, diagnosis and treatment. And it continues to really be growing nicely. And so in such a short period of time for it to be Contributing to that level, I think it's a testament to the investment that we made and we're quite happy with the results.

Speaker 1

Great. Thank you.

Operator

Thank you. Our next question comes from Josh Schimmer with Cantor. Please go ahead.

Speaker 2

Thanks for taking my questions. Just a couple of quick ones. First, are you seeing any shifts in market share as a result of the once launch. And then I noticed you've added Empathy, if I'm pronouncing that correct, to the pipeline. I think in the past, you've indicated that might be a product More design for market building and establishing a sales force as opposed to generating meaningful revenue?

Speaker 2

Are you starting to shift that perspective at all? Thank you.

Speaker 4

Yes, I'll take your first question. So the answer is no. We haven't seen any change in market share. It appears to us that deutetrabenazine XR is cannibalizing Dutetrabenazine in terms of their overall business. So it's more of a shift within the dutetrabenazine franchise than any kind of share gain.

Speaker 4

The other thing that I'll say is that We didn't see a change of market share in 2023 and we don't expect to see any kind of change in market share at least any kind of negative change in market share

Speaker 3

in 2024? Yes. The only thing that I'd add Eric is that The market itself has just been incredibly rich. There's so many patients that need help with their tardive dyskinesia and a great unmet need. So when you look at what we were able to This year record year over year growth over $400,000,000 And I would just say from a class perspective, this continues to be a great opportunity and Looking forward to helping more patients who need help with their tardive dyskinesia.

Speaker 3

Irene, do you want to comment on the FMODI?

Speaker 5

Yes, certainly. So FMODI is a steroid treatment that is currently approved in Europe for the treatment of CAH in adults. And as such, I think It potentially has some complementarity to crenequefont. In the U. S, We do not have an approval for SMOD currently.

Speaker 5

We are reading out two trials of SMOD in the first half of this year. And based on the data from those 2 Phase II trials, obviously, we'll update you as to what our next plans are.

Operator

Thank you. Our next question comes from Anupam Rama with JPMorgan. Please go ahead.

Speaker 6

Hey, guys. Thanks so much for taking the question. Just maybe a quick pipeline question. So the AMPA potentiator in MDD, That's one of the next catalysts here expected in the first half of twenty twenty four. Maybe you could describe the study the key endpoints and what you're looking for in this program Thank you.

Speaker 5

Thanks, Anupam. So yes, you're right. In the first half of this year, we will read The data from MBI-eight forty five, which is our AMPA potentiator as a potential treatment for major depressive disorder. This is a dose finding study. It compares 2 different dose levels of the AMPA potentiator to placebo using a pretty standard primary endpoint of the MADRIS score at week 4.

Speaker 5

And the goal here with this mechanism of action, obviously, since it's Potentially ketamine like, yet through a downstream mechanism associated with NMDA is that we actually would see a more rapid onset of antidepressant activity than is seen usually with SSRIs and other treatments. So we are looking at MADRS as the primary endpoint, but we have multiple other secondary endpoints within this dose finding study, which allows us to look at function and quality of life as well as other the other psychiatric endpoints. And so in essence, be looking at the totality of the information coming out of this dose finding study to make a decision as to whether to proceed.

Speaker 1

Thanks so much for taking the question.

Operator

Thank you. Our next question comes from Carter Gould with Barclays. Please go ahead.

Speaker 9

Good morning. Thanks for taking the question. Maybe another one for Ari. It was brought up a little bit at the Analyst Day, but frankly kind of got overshadowed by it. So, any of the other updates and that is sort of the next generation VMAD2 inhibitors.

Speaker 9

Can you just talk about, obviously the ATS study is ongoing And you've talked a little bit about how that will the impact of that. Can you just maybe lay out kind of your expectations and sort of the progress you expect on sort of the On this broader effort on VMAT 2 follow ons over the course of the

Operator

next 12 to 18 months.

Speaker 5

Yes. So we are just entering the clinic with NBI-eight ninety, which is the VMAT2 follow on. And obviously, Given the depth of knowledge that we have of this VMAT2 mechanism, this is a really important mechanism and platform for us. And valbenazine is an amazing medication in terms of its profile that Eric alluded to earlier. And so we have had keep the bar really high in terms of the ability to differentiate with next generation molecules coming into the clinic.

Speaker 5

And so we haven't too much about the profile of this VMAT2 inhibitor yet. We will obviously do that as we generate Phase 1 data. But we would seek to differentiate with this molecule both in terms of potential indications that we will go into, but also in some of the characteristics of the molecule itself that might lend it for other areas such as long acting intramuscular injection or other approaches that are important in the neuropsychiatric arena.

Operator

Thank you. We'll take our next question from Akash Tewari with Jefferies. Please go ahead.

Speaker 8

Good morning. Thanks for taking our question. This is Ivy on for Akash. So on your Phase 2 schizophrenia trial for your M4 agonist 568, I guess that will be written on this year. It sounds like you are prioritizing CP over equity.

Speaker 8

How much efficacy are you willing to maybe give up here in comparison to other competitors like TAO XT in order to move forward into Phase III study? Thanks.

Speaker 5

Thank you. So the NBI-five sixty eight molecule is a highly selective M4 agonist. And as such, I think we know now from both CAR XT and the Cerevel molecule that The M4 mechanism is implicated in the psychosis of schizophrenia and blocking and agonizing M4 can In terms of the improvement in the PANSS scores and psychosis symptoms. Clearly, there is a different and differentiation between the molecules in terms of the way in which they agonize M4. And so That may play out in terms of differentiated efficacy, but it also may play out in terms of differentiated tolerability.

Speaker 5

And so I wouldn't say that we are Only interested in tolerability, we're interested in both. This is a dose finding study. And as part of that, we will be able to The efficacy in terms of the impact on psychosis scores and the tolerability in terms of overall tolerability to this molecule. So I think both are important and it will be an integration of those data from the Phase II readout that will be important in determining our path forward.

Speaker 6

Thanks.

Operator

Thank you. Our next question comes from Jay Olson with Oppenheimer.

Speaker 12

Congrats on all the progress and thanks for taking the question. Just going back to cremesterfon, Can you talk about how long patients need to be treated with creneserfant before they start to experience some of the benefits on the complications of CAH like cardiovascular or bone density? And do you think you'll have some of that data when you file? And then separately, do you have any plans to study creneserfant in other diseases besides CAH? Thank you.

Speaker 5

That's a lot of questions there. Taking them one at a time, in terms of the effectiveness of crenecephont and its direct benefit in terms of the androgen control. Just to make a comment there, we see that very rapidly and we've shown that on 2 occasions. First in our Phase 2 proof of concept study, where within 14 days of dosing, the degree of reduction in androgen control of Androgens was pretty much maximal because that was also how it played out in the 4 week study in our Phase 3 data. So in terms of controlling androgens, crenequepont does that very rapidly.

Speaker 5

Obviously, that then allows clinicians to reduce the steroid dosing. And by both controlling androgens with crenequipod and being able to reduce steroid dosing, that's how we get the benefit associated with the clinical longer term outcomes. We do have measures of clinical outcome in terms of metabolic measures, bone related measures, growth and other important elements within our NDA submission. Obviously, those are based on data out to 1 year essentially. And beyond that, the other impressive thing about the program to date has been the rollover rate into the open label, which is Essentially greater than 95% for both the adult and pediatric trials.

Speaker 5

And so we are collecting longer term open label data on an ongoing basis and we'll continue to do that until we reach the market. Also, we have a registry effort going on called catalog, which will allow us to put in context our clinical outcome data in terms of what is seen in the general population of CAH.

Speaker 12

Great. Thank you. Any plans for other diseases?

Speaker 5

Actually, I think obviously we're thinking about that on an ongoing basis. I think Jude also alluded to at our R and D Day that we have a whole effort around next generation molecules in CAH and other indications in that space as well. And so we'll certainly be talking more about that in due course.

Speaker 12

Great. Thank you very much.

Operator

Thank you. Our next question comes from Mark Goodman with Leerink. Please go ahead.

Speaker 13

This is Rudy on the line for Mark. Thanks for taking my question. So can you talk about your IP following the recent Patent litigation settlement. And just curious what are your current thoughts on the impact of IRA on your pricing towards the end of this decade? Thank you.

Speaker 2

So we're very pleased with the way that the litigation ended up. We have protection that goes out into 2,038 at this point in time. So I think that really spoke to the Impressive patent efforts that we put behind all of our molecules here at Neurocrine. When it comes to the IRA, As you know, the first ten drugs are under negotiation right now. In September of this year, we're going to see the first time what those negotiations yielded.

Speaker 2

So I think we all look forward to seeing that before we can comment any further on what we think the IRA impacts are going to be.

Speaker 6

Got it. Thank you.

Operator

Thank you. Our next question comes from Myles Mentor with William Blair. Please go ahead. Hey, congrats on the progress. Thanks for the question.

Operator

Just a quick one on the Phase 1, five seventy trial, the JUUL M1M4 agonist in healthy volunteers. Think that trial initiated in September, just wondering how dosing is going for that and when we'll hear about safety for that program. And secondly, would you ever think about running head to head against 568 or 569 in a CNS indication. Thanks.

Speaker 5

Thanks, Mal. On the 570, that's progressing very well. We are going through the Phase 1 program. And At some point, obviously, we'll come forward and talk about that more as we enter Phase II. That's usually what we tend to do in that space, but Things are progressing as expected.

Speaker 5

And there's always a lot of discussion about whether to try to Put more than one investigational product into a clinical trial in order to profile them directly with one another. As you can imagine, that is something we've talked about In the context of the fact that we have such a broad portfolio of muscarinic, it's very challenging to do that though given the that we want to try to accelerate each molecule as much as possible individually. And so at least in my experience over many years in this business, don't seem to line up perfectly for you to be able to do that. And so in the absence of being doing being able to do that, what we are doing is essentially running very, very similar Phase 1 programs for each of these assets so that we can look at the same measures, look at the same outcomes and understand how to compare those individual molecules indirectly.

Operator

Fair enough. Thanks, Harry. Thank you. Our next question comes from Nina Petitogarg with Deutsche Bank. Please go ahead.

Speaker 8

Hey, guys. Thanks for taking my question. I just wanted to circle back to the M4 readout later this year and Paul's question originally about dosing. Is there anything else that you can kind of share on the dose levels that you're testing and dosing frequency? And maybe how they may compare the doses that we've seen for emiraclavin CAR XT from an activity perspective?

Speaker 8

Thanks so much.

Speaker 5

We haven't shared the doses from our Phase II dose planning study up to this point. Obviously, it's not that long before we get our data. So we'll get to see that later this year. What I can say is that we're confident on the dose range that we're testing based on an integration of our preclinical data, efficacy and tolerability from the toxicology program and also from our Phase 1 studies where obviously we explored a lot of different pharmacology to understand how to pick the right doses for Phase 2.

Speaker 8

Got it. Thank you.

Operator

Thank you. Our next question comes from Jeffrey Hung with Morgan Stanley. Please go ahead.

Speaker 4

Hi, this is Michael Riad on for Geoff Hung. Thank you for taking our questions. Could you talk a little bit more about IFFOI? What are you hoping to see in the Phase 2 data and how would you see this becoming part of the treatment paradigm? Is there anything to suggest maybe different uptake depending on whether a patient is in Early adolescents versus adulthood.

Speaker 4

Thank you.

Speaker 5

Yes. We really haven't talked much about the SMOD strategy, particularly here in the U. S. As I said, it is an approved product in Europe for CAH. And these are just very straightforward Phase II readout studies.

Speaker 5

Once we have the data, I'm sure we'll talk a little bit more about that and whatever our next steps might be.

Speaker 6

Thank you.

Operator

Thank you. Our next question comes from Danielle Brill with Raymond James. Please go ahead.

Speaker 8

Good morning, guys. Thank you so much for the questions. I guess, I'd like an update on the cerebral palsy, dyskinesia and schizophrenia studies of valbenazine, should we expect data from those studies this year? And then what sort of impact to sales might we expect from the sprinkle powder formulation

Speaker 5

I can give an update on the ATS and GP programs, both are enrolling and we anticipate data during next year.

Speaker 4

Yes. And just a quick comment on the Sprinkle formulation. Obviously, it's not an approved formulation, but we're looking forward to upon approval rolling it out. We estimate that 5% to 10% of patients with either Huntington's, Korea or Cardiobyskinesia experienced difficulty in swallowing. So this may be a better alternative for them.

Speaker 4

And so we're looking forward to introducing that product upon approval.

Operator

Thank you. Our next question comes from Laura Chico with Wedbush Securities. Please go ahead.

Speaker 5

Hey, good morning guys. Thanks for taking the question. So obviously a lot of discussion today on your internal pipeline activities, but wondering if you can discuss your appetite for external BD at this point? And what flexibility does the balance sheet now provide in terms of potential deal size? Thank you.

Speaker 14

Hey, this is Kyle. Thanks for the question this morning. I think what you've seen here from Neurocrine over the past year was good progress on bringing programs from Our internal drug discovery efforts into the clinic, we put 5 programs in last year. Our team, we work with great urgency here In business development, we don't feel like we have the need to do something large at this particular time. I think What we would expect here over the near term, mid term is to continue to help our research team accelerate some of their efforts and bring their assets that they're currently working on in the pipeline to help us transform that pipeline that we've been discussing at our R and D Day into this next year.

Speaker 14

So in terms of what we're looking at beyond helping our research colleagues, we're probably not going to spend a lot of time looking at things that are pre proof of concept. So it's earlier stage opportunities that bring in technologies for our research team and then obviously anything that's a derisked Later stage clinical stage asset through commercial are things that would be of interest to us. They're few and far between as you know and they are quite expensive as well. So we look at those, but I think our mind right now is doing what we can to help build the pipeline organically.

Speaker 3

So when you think about how we expect to drive shareholder value, you can see where our money is going to continue to drive growth in INGREZZA, Getting ready to launch Kinesarpon, I think that's going to be a meaningful contributor to both health patients and then also to Neurocrine's Top line and a lot of investment in our internal research programs between all the Phase 1 starts that we have this year as well as what Jude highlighted at the R and D Day. We feel very confident about what we have going forward. We of course have Financial flexibility with $1,700,000,000 in cash and then also growing EBITDA profile. We do have the financial flexibility, But right now, we're really prioritizing executing what we have and we have a lot to look forward to.

Speaker 8

Thanks, guys.

Operator

Thank you. Our next question comes from Sumav Kulkarni with Canaccord Genuity. Please go ahead.

Speaker 15

Thanks for taking my question. On your efforts in major depressive disorder, do you think there is any merit in approaching that indication with an episodic versus chronic treatment and do you expect either 770 or 845 to have an episodic component or more durable efficacy aspect to their eventual dosing?

Speaker 5

I think the goal with our current assets in both 985 and also 770 is to be able to try to replicate some of the findings that have been seen with Ketamine and but to do it in a way that is it expands on the efficacy that obviously has been seen in that area. And so episodic dosing is a part of the consideration there. We haven't talked very much about our dosing regimens for our current programs. We have The 770, this is an oral approach to NR2b NAM. That is the first to our knowledge, oral approach to this target.

Speaker 5

And obviously, as we endeavor to generate the data from those Phase 2 studies, we'll be able to talk more about the plans moving forward.

Speaker 6

Thank you.

Operator

Thank you. Our next question comes from Evan Seikerman with BMO Capital Markets. Please go ahead.

Speaker 1

Hi, guys. Nakam on for Evan. Thanks for taking our question. Coming back to the muscarinic, You're using an M4 agonism in the Phase 2 for schizophrenia, but antagonism for the Phase 1 to treat movement disorders. Maybe can you walk us through the mechanism of action differences and what gives you confidence for those indications and expectations for how an antagonism can be differentiated for immune disorders?

Speaker 1

Thank you.

Speaker 5

So the approaches here are very different. M4 agonism, we're focused on looking at that in the context of treating neuropsychiatric disorders, particularly schizophrenia, is the starting indication. And it's very clear, I think, now from data generated in this field that the M4 system plays a role in the psychosis within schizophrenia. For the M4 antagonist, we're actually targeting movement disorders. And so in terms of The M4 systems that are associated with normal movement within the brain, in diseases such as Parkinson's tremor, dystonia, That is disrupted and antagonizing this system, we believe has the potential to add value and to be able to treat those disorders.

Speaker 5

So it is very different in terms of the approach that we're taking there.

Speaker 7

Thank you.

Operator

Thank you. We'll take our next question from David Huang with Citigroup. Please go ahead.

Speaker 16

Hi, thanks so much for taking the question. Maybe just to circle back on INGREZZA for a moment. Could talk a little bit about the higher end of the guidance range in 2024, what would be the factors that would play into that? And maybe along those lines, in terms of accessing the remaining 2 thirds of undiagnosed TD patients, Do you perceive any barriers to reaching that group?

Speaker 4

Yes. As we mentioned earlier in terms of the 2024 guidance range, it's really driven by The success that we'll have early in the year in driving new patient starts and continuing to retain existing patients. As we get to later part of the year or middle of the year, as Matt said, we'll reassess and tighten up what our expected guidance is. In terms of being able to continue to develop the market, continue to drive recognition, diagnosis and treatment. The fundamentals remain the same.

Speaker 4

When we started with the launch of INGREZZA over 6 years ago, only a very small fraction of the TD patients had actually been diagnosed and none have been treated effectively. So we've made great progress and now we believe that about a third of all TD patients have been diagnosed and yet only about Half the time where they actually offered treatment with a VMAT2 inhibitor. So there's still a lot of room in terms of organic growth and a lot of opportunity to make a big difference in patients' lives. And so, the fundamentals of what we do, both in terms of educating healthcare providers across psychiatry, neurology and long term care, as well as continuing to invest in long term or excuse me, in DTC to reach and educate those that are suffering from TD and encouraging them to have that conversation with their doctor. These are the things that we're doing.

Speaker 4

We're very focused on as Matt said, and we're continuing to drive leverage within our existing TD and HD franchises.

Operator

Thank you. We'll take our next question from Mohit Bansal with Wells Fargo. Please go ahead.

Speaker 10

Thank you very much for the question. So maybe one question on the expense side. So I

Speaker 1

mean, it Seems

Speaker 10

like there is some level of margin improvement here in the SG and A side, but you are committing to spending or investing in R and D. As you go forward, I mean, it's still like close to 40% SG and A as percent of sales. As you move forward, how should we think about the leverage Given that for CH, you still may have to invest money in terms of that launch preparation? Thank you.

Speaker 3

Yes, I think the SG and A leverage when you take a step back and think about where we were in 2022, we're at 51%. I think this year in 2024, if you exclude Kineservant,

Speaker 6

we'd be

Speaker 3

down to 41%. So I think 1,000 basis points of leverage over 2 years is quite substantive and proud of what the team has been able to accomplish with the investments that we've made. In terms of leverage going forward, the investment behind Kinesser Fonts It's not going to be anything near the investment that we have behind INGREZZA. I'd expect it to be very Accretive early in the launch and we'll of course give updated guidance next share in terms of expense and revenue expectations. But I think the addition of Kineservpond is only helpful to our SG and A leverage ambitions over the years ahead.

Speaker 6

Thank you.

Operator

Thank you. Our next question comes from Ui Ihir with Mizuho. Please go ahead.

Speaker 2

Hi, guys. Thanks for taking my question. Matt, I think you said the 4th Q INGREZZA number, the growth was offset by gross to net. I was wondering if you can sort of help us understand the dynamics of gross to net in the quarter and as well as the factors that will improve gross to net in 2024? Thanks.

Speaker 3

Yes. When you think about our Q4 results, it's our Q1 ever of $500,000,000 in sales and we're quite encouraged by what we saw. There's always quarterly gyrations in terms of whether it's timing of orders, timing of patients getting refills, etcetera. And so there's choppiness to certain quarters. Q3 was a blowout quarter.

Speaker 3

Q4 was another great quarter. And I think We feel very good with our position headed into 2024. The gross to net dynamic that I commented on is very consistent with what we've had in previous years. There's an accounting requirement where you have to take an incremental discount on your channel inventory. And so that's something that put pressure on our numbers a bit in Q4.

Speaker 3

And the only other item that I'd call out as it relates to net revenue per script, we didn't take our price increase until very late in the quarter. And in previous years, there was some level of contribution in our Q4 numbers associated with the price increase. So the improvement in next year's or in this year's net revenue per script comes down to price increases and then the contract decisions that we make. They're trade offs and I think that overall that's what led to an improved net revenue Per script from going from 5,600 in 2023 to something over 5,800 in 2024.

Speaker 7

Thanks.

Operator

Thank you. Our next question comes from David Amsellem with Piper Sandler. Please go ahead.

Speaker 8

Hi, this is Skyler on for David. First, any thoughts on the potential pricing of crevitifant and the discussions you've been having with payers? And do you expect the reimbursement landscape will be different between adults and pediatrics? And then second, could you provide any updates on the development plan for the M1 Agonist and just talk mechanistically to the value proposition of just targeting M1 versus M4? Thanks.

Speaker 4

Yes. So obviously, we're very enthusiastic about the clinical profile that emerged with crenezerfond. With regards to pricing, it's a little bit premature to comment on that other than to say that this is a rare disease. And we would To have rare disease pricing, we've had initial conversations with payers, and I've been quite pleased and maybe a little bit surprised pleasantly that they are seem to be acutely aware of the issues associated with chronic high dose steroid treatment. And so we've got a lot of work to do still in terms of understanding the value that's emerging from the clinical data.

Speaker 4

And certainly, we believe that the pricing will be in line with the value that we bring to

Speaker 1

market. Let's take one final question, please.

Operator

Our last question comes from Ami Fadia with Needham. Please go ahead. And Ami, your line is open. Please go ahead with your question.

Speaker 1

Sounds like I'll follow-up with Ami later. Tim?

Speaker 2

Thank you all this morning for your questions. Really appreciate this time to interact and we'll be talking a lot more at upcoming meetings. The only closing comments that I have is I hope that you it's come through our enthusiasm as we start 2024 here. We do expect to have another great year. The two things that I really want to point out the most as I close here, Number 1 is probably starting 3 years ago, you saw our investment ramp up in INGREZZA, both with sales force expansions and with DTC efforts.

Speaker 2

You have now seen in the last two years What the difference that can make? We have a multi $1,000,000,000 product on our hands here. So those investments have got a phenomenal ROI on them. They will continue. Our focus with those investments is on the patient.

Speaker 2

It's on building out this very early marketplace that is still, I know I said it for 6 years, I'm going to say it into a 7th year. This is just the tip of the iceberg for this. There are so many more patients that need this drug in order to be able to live fulfilling lives. With KineserFund, it's very much the same way. As Matt said, The amount of investment that we need within that marketplace is much smaller because the patient population is much smaller.

Speaker 2

But nevertheless, I'm very confident that what you will see is the investments that we're making this year, next year are going to be incredible for the lives of those patients and also as a significant leg of growth for Neurocrine going forward. And then finally, the investments we're making in our internal R and D efforts are definitely going to pay off when we get to see a lot more Unfortunately, then you get to see. But I can tell you that in the coming years, you're going to see those efforts in small molecules, which has always been our strong point. But in all of the large molecules, whether you're talking about peptides, proteins, antibodies and gene therapies, Those will start rolling into the clinic. So we're very excited here, and we have a lot of work ahead of us.

Speaker 2

We look forward to talking to you more in the future. Thank you very much.

Operator

This does conclude the NeuroQine Biosciences' year end and 4th quarter results call. You may disconnect your line at this time and have a wonderful day.

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Earnings Conference Call
Neurocrine Biosciences Q4 2023
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