Neurocrine Biosciences Inc (NBIX) 2002 Q2 法說會逐字稿

Good day. All sites are now on the conference line in listen-only mode. At this time, I'd like to turn it over to your speaker, Mr. Gary Lyons. Please go ahead, sir.

Thank you. And thank you, everyone, for joining us this morning. This is our second-quarter earnings call, and joining me today - I'm calling in remotely, but joining me from San Diego is Jim Call, who is director of finance, and Jim will report on the financials for the quarter and six-month period and the year-to-date. Also, Henry Pan is with us, who is the chief medical officer who will report on the status of the insomnia program. Bruce Campbell, senior vice president of development is also with us and will handle questions as they come up. And I'll deal with - at the end - a summary of the status of our other clinical programs and then, as always, be happy to deal with questions at the end of the presentation.

So with that, let me turn this over to Jim call to report on the financials for the period. Jim?

Thank you. Good morning, everyone. As you can see in the press release, the second quarter financials and the six months ending financials, we reported a net loss of 19.8 million, or 65 cents per share, and a six-month loss of 35.5 million or $1.17 per share for the three and six months ended. These results compare with a 13.3 million or 52-cent loss per share and 24.8 million or 97-cent loss per share respectively from 2001.

The revenues were driven mostly by an increase in reimbursements received from Glaxo SmithKline, offset by small timing differences in revenues from Taisho. On the expense side, our research and development expenses are increasing as we go into our phase III end of plan program, and those are driving the increases. It increased to 23.1 million for the second quarter compared with 16.1 in the respective period for 2001, with a six-month increase in research and development to 43.1 million compared to 31.3 million in the same period last year.

All in all, the balance sheet is looking good, with approximately $295 million in current assets as compared to 331 December 31st. I believe that the expectations from the street were very similar to where we came out, with minor differences in revenue and expenses, but the bottom line being fairly similar.

Thank you, Jim. Just to expand on that, revenues and expenses were more or less in line. Our Taisho program, as people remember, is a fully funded program. For that reason, when we underspend for the period, corresponding offset in revenues - lower revenues more or less offset those two items. So other than that, all programs are running very much on schedule, as is the spend, and we believe our burn to be well under control.

So with that, let me now just turn this over to Henry to review the insomnia program, the six Indiplon trials that are now ongoing. Henry?

Great. Thank you. Good morning, everyone. As you all know, we have a total of eight clinical trials in phase III. Of these eight trials, six of these trials have already been initiated and of these six, two have completed enrollment and we remain on track for filing next year. So we're very excited with the program. Everything's going very well.

Let me just run down some of these studies very briefly.

The first study that we got started last year was a one-year, long-term safety study. That study is totally enrolled and the patients are doing well.

The second study is the study in transient insomnia. We were targeting 500 patients. Actually, we couldn't apply the brakes fast enough. We have now enrolled 590 patients into the trial. Which actually is a good thing. We have now a very overpowered study. We are expecting positive results, so the results are going to look very good in this study.

The third study is a six-month long-term safety/efficacy trial, and this study remains on track with its enrollment. Results will be ready late summer of next year.

The fourth trial is a trial that we call the 35-day trial in an adult patient population. That study got started a few months ago and is enrolling patients at a very rapid clip.

The last trial, with the immediate release formulation, is a study in the elderly patient population, and this a two-week outpatient study, and the study again has also started just a very - about a few weeks ago, and the study has started to enroll patients.

The trial that we have initiated with the modified release formulation is a six-month study in the adult patient population, and this study got started about two months ago, and again, this study is enrolling patients at a very nice clip.

Two studies remain to be enrolled - to be initiated later on this summer. These studies are with the modified release formulation, and both these studies will be conducted in the elderly patient population. One study will be a two-week outpatient study, and the other study will be a 35-day inpatient/outpatient study. We expect both those studies to be initiated before the end of the summer.

Gary, that's it.

Okay. Thank you, Henry.

There was one comment there. There's been some discussion of a yet ninth phase III trial and perhaps some confusion associated with that. To be clear, for approval for the modified release, we simply need two positive studies and are now enrolling in three studies, so we have, if you will, three chances to hit our endpoints necessary for approval. We have contemplated a number of other studies as part of a phase IV program, and have given some consideration to moving one of those up and having yet a fourth MR trial, but we've not made a decision to do that, and I think later this year, we'll decide whether we want to start that one now or wait and make it a classic phase IV program, which there are a number of exciting trials we would like to do that we think will help groom the market and give us more differentiations from current - currently-marketed products.

So if I could, a few comments on our other program.

The CRF program with Glaxo is progressing very nicely. Our lead compound has completed two phase I trials, single and multiple dose, and has been successful. Glaxo is now conducting longer-term safety studies with this compound that will enable longer-term safety and efficacy trials and they're expected to complete later this year. We're also on track, as planned, to select a backup compound and expect to be doing that shortly, and that compound will be ready for phase III trials early next year.

Our IL 4 fusion toxin program is an unpartnered program and we have completed our second phase II trial with this product in glioblastoma. This was a 32-patient trial and next month we expect to be at the point where the last patient enrolled would have completed therapy for six months and therefore, that will allow us to take a look at overall survival in this trial and compare it to our previous trial.

And we are right on schedule with the IV version of this trial. That is giving the drug IV for the treatment of breast, kidney and lung cancer. And in this program, we've enrolled now our fourth dosing group, and have yet to reach maximum tolerated doses, and hope to reach that point shortly so that we will know that we have the drug-added dose that would be effective and can then make the decision to move into more definitive Phase II trials.

In the APL program, our APL technology has generated two clinical compounds: The type I diabetes compound in development with Taisho. This compound is now enrolling in a large phase II trial. All of our phase I trials have completed, and in those trials the drug has been safe and well tolerated. We are in discussions and have agreement from a group at the NIH to fund yet a second phase II trial in adolescents. This would be a U.S. trial and this is a program that we'd expect to initiate later this year, funded in part or in full with our NIH collaborators.

We have been in discussions with Taisho now for a quarter and expect later this quarter to finalize the restructuring of the arrangement which will allow us to reacquire North American marketing rights and take over the development with this in conjunction with the NIH, and therefore don't expect that the spend in this program would increase expenses appreciably or perhaps at all.

The multiple sclerosis program is now nearing the point where we'll be able to start a second phase II trial in the U.S., and again, expect funding from the NIH to offset portions of this trial, and our goal is to initiate first patient in this trial by the end of this year, and that trial will be approximately a hundred patients, six to nine-month treatment placebo controlled versus two doses and will be designed to do - to definitively show efficacy so that we could make a move into phase III's.

Our GnRH small molecule program as most people know has completed successfully a phase I safety trial and in this trial, the drug was safe and well tolerated, and our next step will be to move into a one or two-week long-term safety trial. In our first trial, we were able to show that the drug itself actually was able to lower luteinizing hormone, which is a surrogate marker for efficacy, so not only have we shown safety of this compound but believe we have demonstrated preliminary efficacy. But the longer-term trial, that is the one to two-week trial, will be necessary to further confirm that. And in all of our programs, we actively work on back-up and third-generation compounds and have a number of very nice compounds now that we expect shortly one of those can be selected for clinical development as well.

So with that, I think we've covered most everything, unless there's something someone would like to add from San Diego.

And if not, we'll open the call up for questions. 00:12:04

Very good. At this time, if you would like to register your site for a question today, please press the number 1 on your touch-tone phone now.

You can withdraw your question at any time by pressing the pound key. Once again, to register your site for a question, please press the 1 on your phone now. We will pause momentarily while we queue the questions.

We will take our first question from the site of Thomas Way with Deutsche Banc. Please go ahead, sir.

Thank you. In your press release, you allude to the fact that the first phase III study of the IR formulation in transient insomnia is actually complete. Can you give us some more color on how close you are to actually database closure, what the steps are between now and then, and if we could reasonably expect a data announcement in the short term.

Certainly, Thomas. Why don't we turn this over to Henry.

Sure. As I mentioned earlier, we completed enrollment actually slightly ahead of schedule, and as I also mentioned, the original goal was to enroll 500 patients. We applied the brakes and eventually we ended up with 590, 92 patients.

It usually takes anywhere from three months to six months to actually clean up the database and report the results. Our current target is to report the results in November. So approximately three months after all 590 patients are enrolled.

So we're very much on schedule. We're in the process of putting together the statistical analysis plan. We're working very closely with the CRO responsible for cleaning up the data and putting the database in place and doing the fiscal analysis. And as I said, this is - this is unlike a phase I or phase II study. It's a little bit more complicated. This is a phase III program. It does take a little bit longer, but we're on track. I think the current date is November of this year.

Okay. Thank you, Henry.

And actually, I had a separate question. On the partnering front, can you provide us any extra details on what stage of negotiations you've reached with prospective partners, and are there a certain number of candidates that you've narrowed the field down, and what sort of impact any either actual or speculative M and A activity among the pharma companies has had in their decision-making processes?

Yes. I'll deal with that.

The - our partnering plans remain on track. Our stated objective is to secure a partner early next year, so we are, you know, well along pretty much due diligence with all of the key players and have limited our focus to a select group of people that we feel can make this the kind of product that we can make it.

We feel it's important to retain control of the program ourselves through filing, and that will allow us to keep the program on track to meet our time lines and deadlines.

As far as M and A, there certainly has been some, but I can tell you that that's had no impact on the timing or the partners that we're discussing this program with.

Great. Thank you.

Okay, Thomas.

We'll take our next question from the site of Katherine Kim with UBS. Please go ahead.

Thank you for taking my question. I have several questions. The first is, the ninth trial that you contemplate beginning, can you give us some details on that and how it's different from the other MI trials you're conducting right now?

Sure. I'd be happy to. The - actually, there are a number of trials that we would like to do, and as I said, these primarily fall under the umbrella of phase IV programs, so just to give you some examples, in phase IV's we would perhaps look at activities that would expand market potential, so that might be a trial in patients, for example, with insomnia where - excuse me, with depression where insomnia is a co-morbid condition. Some discussions of actually using this trial to show that the drug not only would impact insomnia but may also help alleviate some of the symptoms and issues in patients with depression.

We've considered doing trials, for example, in patients with pain, fibromyalgia, or perhaps patients with cancer. Again, where sleep is the secondary condition associated with the underlying condition.

So any and all of these we think are trials that will be done. The question is, when do we do those. There was some internal discussion that perhaps we should do one of those sooner, and that would yet give us one more trial that could be used as far as registration.

But as I said earlier, the registration will depend upon having two successfully completed phase III trials. We're now conducting three, so we certainly don't need another trial for approval. One might say that an extra trial will just give you one more - one more chance and would mitigate risk further, but we feel we pretty much have done that with the expansion - expansive nature of this program having treated over 5,000 patients in 8 trials as it is. So we haven't made a decision as to whether we would move one of those up and I think we should just plan that we'll continue with the ones that we have and decide at a later point whether it's prudent to add another at this point.

If you were to start any of these trials, how long would they have to be?

Well, it would depend upon the trial. We would not start any trial that would impact the registration plan, so any trial that we would start would be short-term in nature, so that it would complete well ahead of the other trials so that we'd be prepared to file end of '03, which is our present plan.

Okay. And does your increase in R and D guidance assume start of these trials?

Well, it assumes to - not necessarily that trial. There are some other things we decided to invest a small amount of money in, and these things would be extra contracts with CROs who specialize in recruitment and retention, and this is an extra spend that we will add.

We have used these CROs in the past and as you can see, we've been able to not only start but complete our trials ahead of schedule, been able to maintain enrollment and we think it's prudent to just put a little bit more effort there to make sure that all goes according to plan.

But we haven't factored any of the major phase IV programs into this, so the guidance for the year, as you can see from the press release, is a spend of 5 to $10 million over plan to do, you know, primarily what I've told you.

Okay. And I have one more question. Henry, maybe you could answer this one.

Ambien, one of the side effects that people have pointed out is tolerance, and I'm just wondering in your previous trials, have - what have you seen regarding Indiplon?

Yeah. Katherine, a couple ways to answer this question.

First of all, I think that there are talks that Ambien may cause tolerance, but if you read the package insert, it really doesn't say that. You know, I think that there may be complaints in some - with some individual patients. As far as our drug is concerned, if you refer to some of our presentations by Bruce Campbell, from preclinical studies, there's obviously no evidence of tolerance, and since many of these animals have been treated for extended periods of time, up to years, there's actually no evidence of tolerance. As far as the clinical program is concerned, up to this date, we have patients treated for close to - more than six months. We have no evidence of tolerance there. We have two six-month studies. If there was any tolerance, we'd certainly see that in our clinical trials. But we don't expect that to happen because the pre-clinical information suggests that there's no evidence of tolerance.

And also, we specifically looked at tolerance in a 14-day study very early on, and we found that the activity of the drug was exactly the same on day 1 and day 14, and so we do not believe that there's going to be tolerance with this drug.

Okay. Thank you very much.

Okay. Thank you.

We will take our next question from the site of Jim [Birchinoff] with Lehman Brothers. Please go ahead.

Oh, hi, guys. I've got a question for Henry, and then perhaps one for Gary.

Henry, just with regards to the current phase III trials, can you discuss how you powered it for things like patient attrition and whether you have any as soon as from patient experience so far whether you're getting any surprises with patient attrition in this trial and how the CROs you may be employing will help with those issues that can arise in insomnia trials?

Sure, Jim. First, I think in the shorter term studies, obviously attrition is not an issue here. We always power our studies to 90%, or a minimum 90% power, so all our studies are more than adequately powered to achieve the P values that we hope to achieve.

With the longer-term studies, you can divide these studies into maybe two different categories. One would be like a one-month category. The other would be a longer-term category. From what is published in the literature, the longest that these studies have been conducted is three months, so we can only power a study based on information that we have as published in the literature and we have taken that into consideration. Whereas for the longer-term trials, this is really breaking new ground because there's really never been any studies done with extending treatment into six months and into one year, so we have projected attrition rates into our clinical trials. We have come up with numbers that we believe are reasonable numbers, and we have spoken with consultants. So I think our studies are more than adequately powered to take into consideration an attrition rate.

As an example, from the completed studies with Ambien or other sleep aids, in three-month studies, the normal dropout rates or early termination rate is approximately 45%. We currently are looking at approximately a 35, 38% dropout rate. So we're pretty much on track.

We use 45% dropout rate when we did our power calculation, and currently we have about 35, 38% early termination rate. So I think we are more than adequately powered to take into consideration the proper rates for long-term treatment.

Okay. And just -

I might even add in the long-term safety trials, where we'd expect over 12 months significant dropouts, we are running at or below the anticipated dropouts, so we're doing as good or better than expected in our long-term trials to date.

That's correct.

Okay. Great. Just a follow-up question for Gary. In terms of the Taisho reorganization of that agreement, in the event, for whatever reason, NIH funding fell through for the APL program in diabetes and you had to shoulder the costs of development in the U.S., how would that affect your burn?

It's probably premature to tell. I wouldn't expect it to have a significant effect. There are actually other alternative either partnering opportunities or grants that we've applied for. And we could certainly just scale the scope of the trial to correspond with the funding received.

I should point out that as with the MS program, everything else associated with both programs is completed, so there's no required spend in either program related to preclinical safety studies, formulation, manufacturing. All of that, which can be substantial, is already completed. So the going-forward expense is simply a phase II expense, and we feel very comfortable that we'll have adequate funding to offset that.

Okay. Great. Thanks very much for taking my question.

Certainly.

Once again, if you'd like to register your site for a question today, please press the number 1 on your touch-tone phone now.

We will take our next question from the site of Jake Wheeler with Morgan Stanley. Please go ahead.

It's actually Ian [Samaya]. I just had a - I guess two quick questions. The first: Is the timing of a potential partnership for Indiplon based on the partner seeing phase III data?

And I guess the second question is: Given your stated goal of, you know, maintaining control of the development of the drug until filing, have any of your potential partners given you feedback on your current strategy?

The answer is - to the first question is no, there is no requirement to see phase III data. I think everyone now, having seen 8 phase II trials, is convinced the drug works and has, I think, full confidence in that.

I'm sorry. The second question related to partnering?

Right. Just any - since your goal is to maintain control of the program until filing, I don't know if there - if there has been any feedback that you received from potential partners on just strategy, design of the study, that sort of thing.

Yes, we have. And frankly, I thought that retaining control of the development may be an issue with pharma partners, and as we got into discussions, I believe their diligence on us has been well satisfied and there was very little that they were able to add in the development program that we haven't already done. Most have looked at our program and called it something that a big pharma company would do. And I think if you couple that with the fact that most pharmas have no experience developing a sleep compound, then by default they will let us do that.

Where I think we have gotten some interesting feedback has been, again, in the phase IV designs, what are other things that one might do to further expand to show efficacy in other patient populations that typically haven't been parts of their registration package for insomnia programs.

So in the phase IV program, we will not defer decisions to the partner, but we'll work jointly with the partner, but as it relates to the registration package, we'll take partners' guidance but do it ourselves.

And as for the phase IV studies, are there any plans to do head-to-head studies versus the anti-angiolytics, such as a trazodone or also obviously the Ambien or [Sonata]?

Absolutely. In Europe, it will be necessary to do a head to head with a comparative. As one of our market expansion strategies, there's some 25 million prescriptions written a year for first-generation anti-depressants, and that's only done because physicians feels the drugs are safe for long-term use and they're not convinced that Ambien is. And these drugs are typically not very good sedatives/hypnotics so we think that would be a low risk trial to go head to head with these and if we couple that with a long-term label, we think that will be a very successful trial.

Right.

So that's something that is high on the list but certainly not a requirement for registration.

Right. I know it might be a little premature, but when would you expect data from such a study?

Henry, would you like to take a shot at that? If we were to do a head to head trazodone study.

Yeah. We're looking on a phase III B, phase IV plan and hopefully that plan will be finalized, you know, before the end of this year. Phase III B studies traditionally don't get started until, you know, shortly before filing, but our current plan is probably to begin to start some of these studies summer of next year, and these are head to head comparison studies. My guess is it would take at least six months to maybe nine months to complete such a study. So I think we're talking about maybe year 2004 time frame.

Yeah. And to put that in perspective, our plan from a promotional standpoint during the first two years of launch will be to have the drug established as best in class. That is, better than Ambien, and to capture share from Ambien. And then at the point where Ambien goes generic, which is '06, our plan then would be to expand markets and to have data such as this in hand at that time that would allow us to do that.

That's great. Thank you.

Okay.

We will take our next question from the site of David Sax with Sax medical science fund. Please go ahead.

Yes. Thank you. Good morning, Gary and everyone.

Good morning, David.

All the science sounds good. Just a question as it relates to the of corporate governance and accounting.

Looking at your accountants and issues relating to accounting issues such as options, et cetera, how do you see, right now, your status there, along with, again, the exact amount of cash. You mentioned current assets but you didn't mention cash. Thank you very much.

Okay. Jim, cash is approximately $290 million.

Current assets are $294 million. The cash, cash equivalents and short-term investments, are approximately 288 of that.

Okay. So cash is obviously sufficient not only to complete this program but obviously to invest in other activities.

As far as corporate governance, our accountants are Ernst and Young. They have been since the company has been founded. There have been no issues. We believe we're in full compliance in the way that we've accounted for everything. We've taken very close looks at this and corporate governance is obviously a very high priority, particularly in this environment.

Thank you.

Once again, if you'd like to register site for a question today, please press the number 1 on your touch-tone phone now.

It does appear we have no further questions at this time so I'd like to turn the call back over to management for any closing comments.

Okay. I'd like to thank everybody for joining us today. If there are, as always, any last-minute questions, please feel free to call us. I direct everyone to Claudia Jones and Claudia can triage calls to any of us to deal with those. So once again, thank you and we look forward to reporting next quarter results in the same format. Thank you and good-bye.

That does conclude our conference call for today. Thank you for participating. You may now disconnect your lines.