Neurocrine Biosciences, Inc. (NASDAQ:NBIX) Q3 2023 Earnings Call Transcript

Neurocrine Biosciences, Inc. (NASDAQ:NBIX) Q3 2023 Earnings Call Transcript October 31, 2023

Operator: Good day, everyone. And welcome to the Neurocrine Biosciences Reports third quarter results. At this time, all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note this call is being recorded and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Todd Tushla, Vice President of Investor Relations. Please go ahead.

Todd Tushla: Good morning. Happy Halloween and thanks for joining Neurocrine’s third quarter 2023 earnings call. I’m pleased to be 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’re going to try and get to all of your questions. So, Kevin, take it away.

Kevin Gorman: Thank you, Todd, and good morning, everyone. It’s been a very, very good quarter. I’m not going to go into really any detail. I think everyone else who’s going to be talking on the call will, and as always, we just want to spend as much time with your questions as possible. What I will say is that, it’s rare that you get to announce so much progress from a clinical standpoint with CAH from a regularly — regulatory standpoint with the Huntington’s approval and then the outstanding work by our commercial and field medical units in bringing INGREZZA to so many patients and to having the success we’re having there. That’s all I really want to start out with today. So much to talk about, so what I’d like to do is I’d like to turn it over to Matt right now. Thank you.

Matt Abernethy: Good morning. Between our positive Phase III results in CAH, record INGREZZA sales and solid cash flow generation, we had an incredible quarter. During the quarter, INGREZZA sales were $486 million, reflecting 29% year-over-year growth. The INGREZZA commercial, marketing and medical teams are doing an excellent job continuing to build and develop the tardive dyskinesia market. With INGREZZA net sales through Q3 at approximately $1.34 billion, we’re increasing our guidance range to $1.82 billion to $1.84 billion. Our financial profile strengthened in Q3, resulting in non-GAAP diluted earnings per share of $1.54 and over $1.5 billion in cash at quarter end. We continue to prioritize our capital towards growing INGREZZA in both expanding and advancing our pipeline.

As we mentioned during a recent call, we’ll be hosting an Analyst Day on December 5th. The agenda will be focused on our R&D strategy and include preclinical and clinical pipeline updates. We’ll also feature a panel discussion on congenital adrenal hyperplasia centered on addressing the challenges of current therapies for patients, caregivers and clinicians. We look forward to seeing all of you in New York. With this, I will now hand the call over to Eric Benevich, our Chief Commercial Officer. Eric?

Eric Benevich: Thanks, Matt. Q3 2023 was a great quarter for INGREZZA with both strong continued growth from our TD franchise and the initial rollout of the new HD Chorea indication, which I’ll discuss later. It’s been six years since our initial launch and I continue to be impressed with our team’s ability to help improve diagnosis and treatment rates for patients living with tardive dyskinesia. And our just announced increase to the full year guidance range reflects our confidence in continued strong growth. In the half dozen years since the launch, we’ve grown the diagnosis rate of TD from low single digits to around 35% of the prevalent population. While this is great progress, it also means that about two-thirds of the roughly 600,000 patients who suffer from TD have not yet been diagnosed, much less treated with a VMAT2 inhibitors like INGREZZA.

Net-net, we clearly have much work to do to help more TD patients get a diagnosis for their uncontrollable movements and have the option to be treated. In August, we were excited by the FDA approval of the new indication for the treatment of adults with Chorea associated with Huntington’s disease. Now we have an opportunity to help yet another patient community in need. The many thousands of those HD patients who today continue to suffer with untreated Chorea. With approval occurring just a few short months ago, we are in the early stages of introducing INGREZZA to the HD community. But I can say that early feedback has been encouraging. Just as in TD, INGREZZA offers meaningful and differentiated benefits for HD Chorea patients, including high selectivity for VMAT2, rapid and sustained efficacy, good tolerability, simple one capsule, once daily dosing and comprehensive support programs.

These are the reasons why INGREZZA is the most prescribed VMAT2 inhibitor and I’m confident that these attributes will translate well to the HD Chorea community. I’d like to close by congratulating our clinical development colleagues on the recent positive Phase III results for crinecerfont in both pediatric and adult congenital adrenal hyperplasia patients. The trial results were outstanding. I believe crinecerfont, if approved, has the potential to be a paradigm changing treatment option. Today, the standard-of-care utilizing supraphysiologic doses of glucocorticoids to suppress excess androgen production creates unwanted side effects and long-term complications. Patients are faced with dealing with the undesirable effects of excess androgen production or the undesirable effects of chronic treatment with high dose GCs. That’s a terrible tradeoff and we believe crinecerfont can establish a new standard-of-care.

From a commercial perspective, we’ll be diligently working to demonstrate the high value we expect crinecerfont to bring to the CH community. While it’s premature to speculate on price, early discussions with payers have been productive in recognizing the benefits that lowering excess androgens and/or reducing GC exposure could bring to patients living with this inherited orphan genetic disorder. So, at this time, I’ll hand the call over to my colleague, Dr. Eiry Roberts, our Chief Medical Officer.

Eiry Roberts: Thank you and good morning. During our earnings call back in February, I noted that 2023 promised to be an important year for the Neurocrine pipeline. Today, I could not be more pleased to discuss how we are fulfilling that promise. Q3 featured several significant pipeline milestones, which I will address further. Beginning with our on-time FDA approval of INGREZZA for the treatment of Chorea associated with Huntington’s disease. As Eric noted, the vast majority of patients with HD Chorea are currently untreated. Given INGREZZA’s attractive product profile and differentiated attributes, I’m confident that Eric and his team will be able to change that. To further differentiate INGREZZA, we’ve developed the INGREZZA sprinkles formulation, which the FDA accepted as a new drug application last month.

This potential new formulation could serve as a preferred alternative administration option for many of the tardive dyskinesia and Huntington’s disease patients who have trouble swallowing or simply prefer not to take a whole capsule. Turning to crinecerfont, I believe everyone is familiar with the outstanding topline statistically significant and clinically meaningful results from our adult and pediatric Phase III CAHtalyst studies. There is much more data to share with you that will become available over time, either in peer reviewed journal articles or scientific conferences. During our KOL call earlier this month, Dr. Rich Auchus adeptly summarized the hope that the burden of congenital adrenal hyperplasia can someday be alleviated by a simple block and replace strategy.

With the androgen excess caused by CAH managed by treatment with crinecerfont, thus providing clinicians with significantly more flexibility in treating the cortisol deficiency caused by CAH with lower levels of exogenous steroids. In our upcoming Analyst Day, as Matt mentioned, we are planning a panel discussion focused on the current burden of disease in CAH and how crinecerfont, if approved, could potentially significantly ease that burden for patients, caregivers and clinicians. On the muscarinic front, our lead asset, NBI-568, continues to enroll very well in the Phase II study in schizophrenia. In addition, the clinical trial application for NBI-570, our dual M1 / M4 agonist was accepted and that program is currently dosing in a Phase I study.

These two compounds represent just the first of several muscarinic compounds that we will be advancing into the clinic over the coming months. Finally, we remain on track to deliver topline data for both NBI-352 in focal onset seizure and for NBI-846 in anhedonia in major depressive disorder over the coming weeks. It has truly been exciting times at Neurocrine this past year and I look forward to discussing many of our pipeline programs with you at our Analyst Day. I’ll stop here and turn it back to Kevin.

Kevin Gorman: Thank you, Eiry. Nikki, I think we’re ready for your questions now.

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Q&A Session

Operator: [Operator Instructions] And we’ll take our first question from Phil Nadeau with TD Cowen. Please go ahead. Your line is open.

Phil Nadeau: Good morning and congratulations on a very productive quarter. A question for Eric on INGREZZA. Eric, could you talk in a bit more detail about what was driving the strong sales growth in the quarter? Was it the results of the expanded sales force? Has there been any reduction in telemedicine use? Did the expanded label and Huntington’s help? What were the factors that led to such a strong quarter?

Eric Benevich: Thanks, Phil. I think it’s really just carrying forward the momentum that we’ve been seeing throughout the year. Obviously, we’re experiencing the benefits of the expanded sales team, and frankly, I can say that we’re growing nicely in all three of the business segments that we’re in, neurology, psychiatry and now LTC. Our DTC campaign continues to perform well and there’s still a lot of opportunity for growth just based on the fact that the majority of patients with TD as yet remain undiagnosed and untreated. The last thing I’ll say is that, with regards to the HD Chorea rollout, while we’re excited about the opportunity to make a difference in that patient population, the impact on the current quarter is minimal.

Phil Nadeau: Perfect. Congratulations again on a strong quarter.

Kevin Gorman: Thanks, Phil.

Operator: We’ll move next with Chris Shibutani with Goldman Sachs. Please go ahead. Your line is open.

Chris Shibutani: Great. Thank you very much. I notice that in the updated slides you have the TD diagnosis rate increasing from 30% to 35% of the overall population. How much higher do you think this can go and what is a potential in terms of the pace of growth might look like going forward? Thank you.

Kevin Gorman: Yeah. We haven’t given guidance in terms of where we think the diagnosis rate will ultimately net out. Though, personally, I can say that we’re far from the peak where we are now. Six years in we think about 35% of the TD patients have been diagnosed and that’s really starting from a baseline at the time of launch in the low single digits. So we continue to increase the rate of TD diagnosis and I feel really good about the progress that we’ve made. But still approximately two-thirds of patients remain undiagnosed and our research indicates that only about half the time when a patient is diagnosed with TD, they offer treatment with the VMAT2 inhibitor. And so we have room for improvement both in terms of the diagnosis rate and in terms of the frequency of the use of INGREZZA in that patient population. So still lots of room for improvement despite the progress.

Operator: Our next question comes from Paul Matteis with Stifel. Please go ahead.

Paul Matteis: Great. Thanks so much. I just wanted to clarify the Phil’s question. Was — were there any kind of one-off benefits this quarter either from inventory or net price tracking better than expected? And then on the focal program, as we get close to data year, I just want to ask an open question, like, how excited are you about this asset and how do you think about the criteria not just for what’s a win in the study, like is it P-value driven or is it more qualitative? And then what’s the criteria for not just moving this forward but taking it forward right into a Phase III? Thanks so much.

Kevin Gorman: Hey, Paul. Nice to hear from you. The quarter was very, very clean. Nice underlying growth. Nothing significant to note on inventory. So really reflects both the LTC, psych, neuro team really doing an excellent job continuing to drive diagnosis and getting patients treated with INGREZZA. So, overall, very good quarter. Sets us up nicely for the rest of the year and heading into 2024. Eiry?

Eiry Roberts: Hi, Paul. First thing to say is that we remain on track to be able to release the data from the focal onset seizure study for 352 in this quarter and we’re very excited about the asset in terms of the potential benefit that it can bring for patients with focal onset seizures. It’s, obviously, as you know, a Nav1.6 selective agent. This study, however, is a proof-of-concept study. So it is a dose finding initial study in focal onset seizures patients who have had inadequate response to up to three other treatments. We obviously will be looking at the reduction in seizure frequency that we can see in the context of this program and this molecule. And I think it is necessary in the face of the competitive space for us to be setting the bar high.

We haven’t talked specifically about targets there, given that this is a proof-of-concept study, but we’d want to see a robust efficacy signal. And based on what we understand about this mechanism and the selectivity, obviously, that — how that relates in terms of tolerability is going to be important in our decision-making as well.

Paul Matteis: Great. Thanks. Congrats on the quarter.

Operator: Our next question comes from Tazeen Ahmad with Bank of America. Please go ahead. Your line is open.

Tazeen Ahmad: Hi. A couple questions for me. Eiry, just so I clarify, so you will be showing data on seizure freedom for the focal onset seizure update. I just want to make sure that that’s going to be part of the topline. And then, secondly, as you think about the opportunity in Huntington’s, I know that this year’s guide does not include very much contribution, but in the grand scheme of things, how big of an opportunity for INGREZZA do you expect it to be in Chorea? Thanks.

Eiry Roberts: Thanks, Tazeen. With respect to the proof-of-concept study, the primary input of the study is actually tolerability and safety, but we will be reporting out issues related to seizure frequency as well. So both in terms of reduction in overall seizure frequency, percentage of patients getting to a 50% reduction and also any information we have around seizure freedom.

Tazeen Ahmad: Okay. And how many patients’ worth of data would that be?

Eiry Roberts: It’s 100 patients, but there are four dose levels, three active and one placebo group in the study.

Tazeen Ahmad: Okay. Thanks. And then on the Huntington’s?

Eric Benevich: Yeah. I’ll tackle that question. So on a relative basis, the Huntington’s opportunity obviously is smaller than TD. We estimate the addressable population of people living with Huntington’s disease and Chorea at around 20,000 to 25,000. Currently, only about 20% get treated with a VMAT2 inhibitor. And so while there is a significant opportunity to make a difference in that patient population and to increase the treatment rate especially, on a relative basis, it’s still a smaller commercial opportunity than TD, and TD is going to continue to be our growth driver going into the future.

Operator: Our next question comes from Brian Abrahams with BRC Capital Markets. Please go ahead.