Neurocrine Biosciences Inc (NBIX) 2009 Q3 法說會逐字稿

Good day, everyone, and welcome to today's program -- Neurocrine announces third-quarter 2009 financial 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 not this call may be recorded. I will be standing by if you should need any assistance.

It is now my pleasure to turn the conference over to Kevin Gorman.

Thank you very much and good morning, everyone.

Today, I am joined by Chris O'Brien, our Chief Medical Officer; Tim Coughlin, our Vice President and CFO; and Jane Sorenson, Investor Relations. We are going to bring you through this morning our third-quarter financials and our year-to-date, and then we are going to spend time with Chris taking you through the progress, which has been significant since our last call, on all of our clinical programs in the Company.

Before we get started, I'd like to ask Jane to read our Safe Harbor statement.

Good morning. I want to remind you of Neurocrine's Safe Harbor precautions. Certain statements made in the course of this conference call that state the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements which are subject to risks and uncertainties. Information concerning factors that could cause actual results to differ materially from those contained in or implied by forward-looking statements is contained in the Company's SEC filings included but not limited to the Company's annual report on Form 10-K and quarterly reports on Form 10-Q. Copies of these filings may be obtained by visiting the Investor Relations page on the Company's website at www.neurocrine.com.

Any forward-looking statements are made only as of today's date, and we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances.

Thank you, Jane. Tim?

Thank you, Kevin, and good morning, everyone. We released our financial results for the third quarter yesterday afternoon and remain on plan from a financial standpoint.

Our loss for the quarter was $8.2 million, or $0.21 per share, based on 39 million shares outstanding. For the same period last year, we are at a loss of 17.7 million or $0.46 per share. Our year-to-date loss is $1.11 per share, compared to $1.56 per share last year. We are slightly ahead of budget for the year based on expense management efforts throughout the Company.

Research and Development as well as General and Administrative costs were in line with our expectations and significantly lower than the prior year due to lower personnel costs, lower external development costs, and professional service costs. We continue to invest in our GnRH program, kicking off the 901 Daisy Petal Study as well as our VMAT2 program with our Phase I work in Canada.

As we explained during the first and second-quarter calls, there are a couple of accounting nuances that one has to consider when comparing 2009 and 2008 numbers. They all relate to how we are required to account for the building in 2008 versus 2009.

The first is related to rent expense. In 2008, rent expense was treated as interest expense in accordance with Generally Accepted Accounting Principles. In 2009, this same rent expense is now characterized as a component of operating expenses.

Secondly, during 2009, we began to recognize a deferred gain on the sale of a building that occurred in December of 2007. This accounts for approximately $700,000 of non-cash other income each quarter.

Finally, we record rent on a straight-line basis over the term of the lease. This adds approximately $200,000 of non-cash expense each quarter to the income statement.

From a cash and investment perspective, we are managing our cash flow and expense closely. We ended the quarter with $63.7 million in cash and investments.

During the third quarter, we entered into two significant financial agreements. The first agreement was our committed equity financing facility, or CEFF, with Kingsbridge. We are the first company to negotiate a warrantless CEFF with Kingsbridge and we plan to file our S-3 today with the SEC to finish all of the applicable terms of this agreement.

The second agreement was an amendment to our building lease. It was effective September 25, 2009. This amendment will save us approximately $27 million over the term of our lease agreement and also shifted certain liabilities from short-term to long-term. We will file our 10-Q today with the SEC.

With that, I will turn it back over to Kevin for the balance of the call.

Thank you, Tim. Actually, now would be a good time for Chris to bring us all up to speed on all of the programs and the progress to date, particularly with our VMAT and elagolix program.

Thanks very much, Kevin.

Lots going on, as you mentioned earlier, since our last call. We're very happy with the progress that's being made across multiple fronts.

As you are aware, we have Urocortin 2, a Phase 2 program that is currently in development for patients with acute decompensated heart failure. As mentioned in previous calls, we have been keen to move from the stable heart failure patient population into patients with acute decompensated heart failure. Our long-term academic collaborators in Christchurch, New Zealand at the Cardioendocrine Research Group have initiated a clinical trial in patients with acute decompensated heart failure. This trial began recruiting patients earlier this quarter and enrollment is expected for approximately 50 subjects. So very happy with the progress made on that front as we continue to move the Urocortin program along.

A little closer to home than New Zealand, in North America, is our VMAT2 program. As mentioned on our last call, we had prepared and filed a clinical trial application, or a CTA, in Canada four our first Phase 1 study. This is a single ascending dose trial.

The key for us with the VMAT2 program is it's not a question of the mechanism. We know that VMAT2 inhibition is effective for a number of central nervous system disorders. Our goal with this program is to go after an unmet medical need in a condition called Tardive Dyskinesia. So we know VMAT2 inhibition can be effective, but there are no approved drugs for TD and there are some problems with current VMAT2 inhibitors that render them difficult for this population.

What we needed was a drug that had a good safety profile and a very specific pharmacokinetic or PK profile. So the Phase I program offered an opportunity for us to have very crisp go/no go decision points. The first was the single ascending dose trial. The CTA was approved this summer. We began -- we actually have enrolled and done very nicely with the Phase I single ascending dose trial in Canada. We will be reporting results from that trial a little this quarter.

The key for us is, if the drug has the desired safety and PK profile, it is a go decision and we moved immediately into the repeated dose trial in Q1. This is to show -- to make sure we have, again, the key safety and PK profile desired with repeated daily dosing of this once-a-day compound.

If that PK profile holds up through the repeated-dose Phase 1 trial, then we file an IND and hope to begin the proof of concept trial in Tardive Dyskinesia in 2010 as discussed in the past. So very pleased with the progress that has occurred with the VMAT2 program and we will let you know whether we have a go/ no go decision as we get the PK and safety results from the single ascending dose trial.

Let's move on to the elagolix program. As you know, this program has continued to move forward quite nicely. We are actually now close to some near 900 subjects who have been exposed to elagolix, more than 500 patients with endometriosis for treatment -- with treatment for up to six months. So we have been very pleased with the progress. As you know, we've seen nice data supporting efficacy across multiple monthly scales and daily skills including dysmenorrhea, dyspareunia or painful intercourse, patient global impression of change and the validated endometriosis health profile.

What we reported earlier this year was that, in the Lilac Petal Study, one of the daily scales, a non-menstrual pelvic pain daily scale that the FDA asked us to try, was associated with a very low baseline score at the beginning of the Lilac Petal Study. Therefore, on that specific scale, we were unable to show much improvement in symptoms. That's obviously a problem of patients who didn't have symptoms, can't get better. There were lots of women who had very minimal non-menstrual pelvic pain, at least as assessed by that specific scale.

So as you know, we took that data, along with our other clinical information and output from various patient interviews and focus groups, and we met with the FDA in August at a Type C meeting. We shared our data, and based on the discussions at that meeting, we modified the non-menstrual pain scale to more appropriately reflect how patients experience pain on non-menstrual days.

The scale was then immediately placed into a study that we had set up in anticipation of the output from this meeting, the 901 or Daisy Petal Study. Within a couple of weeks of the FDA meeting, we actually began enrollment in that trial. So the team here had done a very nice job in getting that up in place as a Phase 2 study in advance. They amended the wording of the scale, immediately got going, and I'm very pleased with the way recruitment in that trial is going.

We have utilized our best investigator sites here in the US. Originally, our expectation was that this trial would give us a very nice read on how the scale was performing, the utility of the modifications. We would use that information and the statistical characteristics of that, the variance and variability of the scale, to help us estimate sample size for the Phase 3 study.

So the recruitment has actually, because it's been going so well, in a blinded way, we've actually looked at the screening scores that women collect as they are going through the screening phase of the study before randomization. We are very pleased to see that, in fact, that the modifications to the scale have achieved what we had hoped, namely that there is a much wider dynamic range. Women have -- more likely to have scores in the moderate to severe range than they had with the previous version of this scale. This seems to reflect indeed more appropriately how women experience their symptoms on non-menstrual days. This actually was encouraging.

We sat down with the statisticians and said "Okay, here is what we are seeing in the screening data. What would it take to get more robust and more informative information out of this trial than simply getting directional information that had we originally intended for sample size estimates?" The stat group came back and said "You know, the current population of 80 subjects gives you directional information. If you had 120 subjects in this trial, you should be able to have more adequate power to talk about statistically meaningful separations of placebo and elagolix, even on non-menstrual pelvic pain. So we amended the protocol as the recruitment is going on, and we will be recruiting for a population of 120 subjects.

So this is going well. This adds a few, maybe eight to ten weeks I think to our recruitment timelines, but all in keeping with the intent of then taking the 901 study data, along with all the other Phase 1 and Phase 2 trial data and requesting an end of Phase 2 meeting with the Division of Reproductive Products at the FDA in Q2 of this year.

So the goal, as we've said before, is to get formal kind of PDUFA buy-in to these scales and end point analyses by the FDA. With the end of Phase 2 meeting and SPA or Special Protocol Assessment, that will allow us then to proceed to Phase 3.

So, 901 study recruitment is going very well. The preliminary look at the screening data says the wide dynamic range of the scale is much more appropriate and in fact is favorable enough that we can power the study to give us the kind of results that should be very robust and informative and allow us to get to our end of Phase 2 meeting. We will request that end of Phase 2 meeting as soon as (inaudible) readout from 901 comes, and that is anticipated in Q2 of 2010, so very nice progress on that front.

A couple other things on the elagolix program --- as you know, we have a 703 study, or Tulip Petal Study, winding down in Central-Eastern Europe. We have, we are in the midst of the QA and QC process for the Week 12 data and we will be reporting that data as soon as it is unblinded a little later this quarter. The patients finish out going through their Week 24 and Week 30 visits coming up in the very near term of that six-month trial.

Then finally, some of our clinical safety and efficacy data was recently reported and well received at the American Society of Reproductive Medicine. The meeting was held in Atlanta, Georgia last week and we presented some of Petal Study there to good review.

So very nice progress in elagolix, very nice progress in VMAT2, progress with Urocortin. And we look forward to keeping you updated as we have the 703 results later this quarter.

Kevin?

Thank you very much, Chris.

So as you can see, this has been a busy quarter for us. Quite a bit of work has been done and I've got to say that I am very pleased with the results that we are already seeing out of the 901 study, at least as far as blinded screening data as goes, as Chris has mentioned.

At this point, let's open it up for questions.

Thank you. (Operator Instructions). Brian Abrahams, Oppenheimer and Co.

Thanks very much for taking my question and congratulations on getting the Daisy Petal Study started so quickly.

I have a couple of questions regarding some of the modifications, the amendments that you've made to that study. I guess, can you give us a sense of what your initial target was for the mean baseline score with this modified pain scale?

Thanks, Brian. You know, in a clinical trial, you have certain assumptions that go into any kind of (inaudible) size estimate and power calculation. We know that, for these 0 to 3 scale, there are 4 point scales that the FDA has been in favor of, and we know that a moderate to severe is a score of 2 or greater. For things like dysmenorrhea, which is the most disabling and intense symptom of endometriosis, we typically see scores in the 2, 2.5, 2.6 range. That is indeed what we are seeing here.

As you know, in the Lilac Petal Study, with that version of the scale, about 40% of the daily values during the placebo lead-in period were 0, and 40% of the values were 1. The baseline value on the non-menstrual days was kind of 0.83 or if you look at all days rolled up, it was 0.9. That value just doesn't give you any room to improve.

So what we've done with this population in 901 is make sure that the scale is appropriate, that it has a wide dynamic range, and that women enrolling in the trial are women who have moderate to severe endometriosis, with moderate to severe non-menstrual pain, and moderate to severe dysmenorrhea. As such, I would expect the mean scores to be somewhere in the 1.5 to 2 range, considering that most women with moderate to severe endometriosis only have about 8 to 10 days per month of non-menstrual symptoms.

Okay, so it seems like you sort of felt -- it seems like you are in a better place than you were with the prior scale, but I guess I'm just wondering if you think the modifications were as successful as you had hoped. Had you hoped to fall into closer to the 2 to 3 range? (multiple speakers) detect a greater difference?

No. No, because, as I mentioned, women even with severe endometriosis typically report only 8 to 10 days of a, say, 20 to 25 day month with non-menstrual pain. So they have days of no symptoms or very mild symptoms.

And so one of the other things that we've enjoyed in our discussions with the FDA is that maybe mean scores are not the best way to assess non-menstrual pain. If you have some, many 0 days per month but you also have days of 2 and 3, your mean score may be 1.2. Is that the best statistical method? The FDA told us "Well, you know, maybe that's not the best way to do it. Maybe a responder analysis would be a more appropriate way of assessing this kind of scale." So they've given us some latitude in how we will do the statistical analysis for these end points.

One other piece to that, just to emphasize this is in fact to confirm what we know about non-menstrual pain. Even in our previous studies, for example the 603 or Petal Study, when we used the monthly scales, the monthly recall sales such as the CPSSS. Non-menstrual pain was typically in the 1.8 region, even in the monthly scale of that old version, whereas the monthly look-back for dysmenorrhea was in the 2.3 or 2.4 region.

So I'm very comfortable that this is appropriately reflecting how women suffer. We have some options of how to work with this, including both a mean change from baseline as well as responder analysis.

Got you. Okay, that makes a lot more sense now. One more quick question and then I'll hop back in the queue. Just, can you help us understand what influenced the decision to now expand the study? Obviously, it is going to push back time lines for the results, the end of Phase 2 and presumably the start of the Phase 3. Can you just maybe help us understand why you decided now to try to achieve statistical significance rather than just achieve results that will give you a sense of powering for the Phase 3? I mean, is your thought that maybe this study could be potentially considered one of the pivotal studies? Just help us understand your thought process there.

Yes, I don't think this would be considered a pivotal study in that we know, from our discussions with the FDA, that we need to get to the end of Phase 2 and SPA. This will clearly be a supportive trial, obviously, and add tremendous weight to the NDA when we get there, but my anticipation is that we will still go ahead with the full Phase 3 program as planned. That is a program that, as you know from previous comments, we won't begin the Phase 3 trials until the partnership deal is done.

I think, to be honest, the utility of the expanded sample size doesn't change anything for me about the trial. It is still giving me what I need to go into Phase 3 but as you know, we have kind of been beaten up by people. It adds a robustness and some weight to the Phase 2 study that would probably be useful.

Okay, thanks very much. I appreciate the clarity.

Thank you. (Operator Instructions). Craig Gordon, Cowen & Company.

Good morning. Just a couple of questions for you -- first, because you guys have modified this daily non-menstrual pain scale, is this -- I guess is FDA most focused on this? Is this their really preferred end point for the Phase 3 or are they just trying to get a better feel for whether or not it is a valid end point, since we know that this has not typically been used in the past?

So Craig, thank you, a couple of important points. In fact, the reason we've had these discussions with the FDA is because all the other aspects of assessment, in particular dysmenorrhea, dyspareunia, analgesic use, all of those other things have been sorted out. So what we are talking to the FDA is the one piece that we needed to get some clarity on, because of the problem that we uncovered with the conversion from the monthly scale to the daily scale.

All of these things in fact are not new. The reason we have dysmenorrhea and non-menstrual pain is because these are the components of the old B-and-B scale that have been used for decades, since the early 1980s. These are the scales that were used for the approval of Lupron, Depo-Provera, Danazol, [Cinarell], etc. So in fact so these are not new scales; these are a new twist to the scale and specifically requested by the FDA to change from a monthly dysmenorrhea to a daily dysmenorrhea, from monthly non-menstrual pain to a daily menstrual pain, and some modification to the wording.

So it is the fact that the FDA considers these modifications of the B-and-B scale that allows us to proceed with the testing plan as we are doing it now.

The thing that the FDA has been very clear about, not only to us, Neurocrine, but to other sponsors who have worked in the endometriosis space, is that they consider the treatment of pain a very important aspect of endometriosis, and they want therapies, new therapies, effective therapies that will treat both dysmenorrhea and non-menstrual pain. That's why we have had so much back and forth with them.

It is relatively easy to get a drug that works on dysmenorrhea. The trickier part has been non-menstrual pain, partly because of the variable and intermittent nature of that symptom among women with moderate to severe endometriosis. So that's why we are doing what we are doing.

Great. In terms of partnering and the SPA and having to conduct a Daisy trial, when do you -- and of course I know this hinges on a partnership. Is it still feasible to start a Phase 3 in the second half of 2010, or do you think that it is possible or likely that it's going to slip into 2011?

Oh, no, the plan is still 2010. As I mentioned, a modification to the sample size for the 901 study, it adds, I don't know, 10 weeks or so to the program. So we will request -- the goal is to request an end of Phase 2 meeting and to submit that request in Q2, in parallel with the SPA submission and with output from the end of Phase 2 and SPA. Sometime presumably in summer, we will have the opportunity of starting a Phase 3 program in the second half of 2010.

Everything else that has to do with the program that goes into starting a Phase 3 trial, is being done and will be completed in time for that, such as the manufacturing of clinical trial drugs. So that is all going on, including all of the planning stages for the registration batches that are necessary for that. The entire preclinical program is actually completed except for the two-year carcinogenicity studies which are ongoing right now in both rat and mouse.

Okay, and if I may -- I'm sorry, go ahead?

No, that was it.

Then if I may, just one other question. Is your projected cash burn for the year, is that remaining at $50 million to $55 million? Can you give us an update on that?

That is remaining at that number.

Okay, great. Thank you very much and congratulations.

So what I'd like to take this opportunity right now just to reiterate was it was only last quarter when we had spoken. There was a significant amount of uncertainty around this program. We had reported the trial results in which we had clearly demonstrated efficacy in a number of end points but there was one that we still needed to hit. That was the non-menstrual pelvic pain. We had not yet met with the Agency at that point in time.

We've shown, throughout this entire program, that the drug works, and it works as well as the gold standard. We did a head-to-head noninferiority trial against DMPA and showed that we were as good as DMPA, as was as good as Lupron in its noninferiority trial.

But in this one short quarter, we were able to meet with the Agency and have an extremely productive meeting with them. We have nailed down and end point that we came about through all of the clinical trial data that we had had, but in addition, we had performed a number of individual patient interviews and a number of focus groups with patients so that we could better understand how they suffer, both in dysmenorrhea and particularly in non-menstrual pelvic pain, and to get their reactions to different types of ways to uncover the ways that they suffer.

We took all of this work to the Agency and they appreciated that very much. We suggested to the Agency a path forward with this revised language. I must say that it's language that actually takes us back closer to the original [CPS FS] or B-and-B scores which we've always had up on. And the Agency appreciated that. That's why we are so pleased now that getting this look at the -- blinded look at the baseline scores, that this is actually responding extremely well.

We are coming up with a baseline score of approximately 1.5. That's not terribly different than what we saw with the monthly scores.

One of Agency's goals and getting away from the monthly scores was wanting to get away from look back bias. So we have seem to have been able to do that and yet be able to use the entire dynamic range of the 0 to 3 point scale.

So in one short quarter, we have been able to, I think, remove a tremendous amount of uncertainty that existed in the program, and we are well on our way in this trial. The delay, if you want to call it a delay but I look at it more as just building even more certainty in the program, continuing to remove risk whenever we have the opportunity to do it, and that was the main driver for increasing the sample size in this study so that we can come to the agency with approximately 6 Phase 2 studies -- 2 Phase 2as and 4 Phase 2bs, when they come to the end of the Phase II meeting, and that will be nearly 1000 subjects will have been dosed at that point in time.

Also, I will be presenting at the Oppenheimer conference next week on Tuesday, and I will be showing quite a bit of data at that Oppenheimer conference that perhaps we haven't seen previously.

Then one last thing that I do have to say is that the other program in one quarter that we've got going pretty robustly is our VMAT2 program. As Chris has said, we had filed the CTA as of our last call, and now we have actually dosed two entire patient groups in that study. So that is a program that we are very excited about because of the indication that it is in is right in the sweet spot of Neurocrine in the neurological indication, particularly movement disorders and a number of indications there and the high unmet medical need there.

So having said that, I would like to thank you all for your participation this morning and I look forward to talking to you all in the future. Thank you very much.

Today's conference has concluded. You may disconnect at any time. Thank you for joining us, and enjoy the rest of your day.