Neurocrine Biosciences Inc (NBIX) 2010 Q4 法說會逐字稿

Good day, everyone, and welcome to the Neurocrine Biosciences report fourth quarter and year-end 2010 results.At this time, all participants are in a listen-only mode. Later you'll 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 if you should need any assistance. It is now my pleasure to hand the call over to Kevin Gorman. Please go ahead, sir.

Thank you very much and welcome, everyone, to our fourth quarter earnings call. I'm joined today by Tim Coughlin, our Chief Financial Officer, who is going to run you through our quarterly and year-end financials, and Chris O'Brien, our Chief Medical Officer, and Chris will you an update on our of R&D collab-- programs, including our Abbott collaboration.

If you would recall at the beginning of 2010 we had -- Jane Sorenson will now read you our Safe Harbor statement before I get started. Thank you.

Good afternoon. I want to remind you of Neurocrine's Safe Harbor cautions. 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, the forward-looking statements is contained in the Company's SEC filings, including, but not limited to, the Company's annual report on form 10-K and quarterly reports on form 10-Q. Copies of these filing 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 of circumstances.

Thank you very much, Jane.

As I was saying, at the beginning of 2010, we had given guidance that our target burn was going to be approximately $40 million. We've put in place quite a few savings activities, and if you strip out the monies that we have gotten from the Abbott and the BI collaborations, we did indeed burn less than $40 million this past year. We continue, even in the face of the funds that came in from those collaborations to manage very conservatively our funds, while aggressively pursuing our internal programs.

So what I'd like to do now is to turn it over to Tim, who can take you through more detail of 2010.

Thank you, Kevin and good afternoon to all.

After the market closed today, we filed our earnings and our 10-K for the 2010 year end. It was another good quarter for Neurocrine and the end to a pivotal and successful year. Financial guidance provided on our July 2010 earning call subsequent to our collaborative deals was for a $32 million in revenue, $46 million in expenses, and an $8 million to $11 million net loss. We also guided to ending 2010 with at least $130 million in cash, investments, and receivables. These goals were all met. Most importantly, the cash goal where we ended with $135 million in cash, investments, and receivables, ahead of our revised target of $130 million. Our loss for the year was $8 million, or $0.15 per share, compared to a loss of $51 million or $1.30 per share in 2009.

For the fourth quarter of 2010, we had net income of $2.5 million or $0.05 income per basic share outstanding, compared to a net loss of $7.9 million or $0.20 net loss per share in the fourth quarter of 2009. This dramatic change in financial results is primarily a product of the revenue recognized under our collaboration agreements with Abbott and Boehringer Ingelheim, coupled with cost control measures that have been implemented across the company. Revenue under collaboration agreements was $33.5 million in 2010, versus $3 million in 2009. Revenue for the fourth quarter of 2010 was $13.7 million verses $700,000 in 2009, a $13 million increase year-over-year. Through the amortization of up-front fees, we recognized $22.6 million in revenue for the year ended December 31, 2010, and $9.2 million in revenue for the fourth quarter of 2010. This compares amortized up front fees of $2.9 million for all of 2009 and $700,000 for the fourth quarter of 2009. Additionally, we recognized $10.9 million in sponsored research and development during 2010, with $4.4 million coming during the fourth quarter.

Research and development expenses as well as G&A costs were in line with our expectations for the quarter and year-to-date. These expenses year-to-date are significantly lower than 2009 levels, primarily due to lower personnel related costs and across the board expense control. Late in the fourth quarter of 2010, we negotiated a sublease for a portion of our building to further mitigate facility costs. This sublease is for approximately 10% of our existing space, and will net us approximately $600,000 per year over the three years of the agreement. Although this transaction is a net positive to the Company and reduces our cash burn, generally accepted accounting principles requires a liability be recorded. By entering into the sublease and vacating 10% of the space, we were required to record a cease-use loss of $2.4 million gross. This amount represents the net present value of the shortfall expected to sublease payments to primary lease payments over the remaining term of our main lease, which lasts through 2019.

During the fourth quarter, we also disposed of our final auction rate security, we received approximately the net carrying value at the end of the third quarter of 2010 for our final auction rate security, and this sale resulted in a $1.3 million gain in our financials for the fourth quarter. In the fourth quarter we also received approximately $1 million under the biotech tax credit for qualifying therapeutic discovery programs, which were made available as part of the healthcare reform package. We qualified for all four of our applicable programs at the maximum allowable award.

For 2011, our financial guidance is a net burn from operations of approximately $3 million to $6 million. Revenue for 2011 is expected to increase to approximately $75 million to $80 million, which includes amortization of up-front license fees of $36 million and anticipated milestones earned under collaboration agreements of approximately $30 million. Expenses for 2011 should approximate $44 million to $48 million with the external spend on our VMAT2 program increasing. Net income for 2011 is expected to be $34 million to $39 million or $0.62 to $0.71 per share based on 55 million basic shares outstanding. We expect to end 2011 with approximately $130 million in cash, investments, and receivables. For those looking for more financial details, our 10-K is now out there, available online at www.sec.gov.

And with that, I'll turn it back over to Kevin and Chris for the balance of the call.

Thanks, Tim. So, Chris is going to take you through the programs, and we have been making quite a bit of progress in each of our programs going forward. Clearly, a lot of our effort has been with our collaboration with Abbott. It's been a very good and productive collaboration. I'm quite pleased with the size of the team that Abbott has put on there and that team taking really complete ownership of elagolix at this point, in all facets of the program. We work quite closely together and it's a good working relationship that we have.

I'm going to turn it over to Chris right now to go into more detail on that and also the other programs.

Thank you, Kevin.

Truly, you can reinforce what Kevin has just said about the collaboration. It reaffirms our choice of a good partner, and the Abbott team is bringing to the table expertise across a wide range of disciplines and functional areas that are all good for elagolix going forward, whether it's health outcomes and economics, commercial market research, alternative indications, sophisticated PK/PD modeling, et cetera. All very valuable additions to the program. Our collaboration is focused right now on all the normal kinds of preparations that lead up to the end of Phase II meeting, planned for March with the FDA. And it is at this meeting where the primary focus is on the clinical programs, specifically the high-level agreements -- major agreements, on end of phase -- sorry, on the Phase III clinical trials and activities that would lead us toward the NDA.

So, this is an intensive amount of work of a large number of people from Abbott and Neurocrine working together to get this material and data into the FDA in advance of the actual face-to-face meeting in March. Obviously, the results of that end of Phase II meeting will help us determine the timings and the steps for the Phase III program going forward. While that's going on, we're collaborating on additional supportive clinical activities as is normally done in this setting, so the balance of the checklist that needs to be prepared for the NDA, namely the completion of the remaining Phase I studies looking at other drug interactions in special populations, the thorough QT study, that sort of thing. And so those are all gearing up for initiating once the end of Phase II meeting is out of the way, and the progress has really been quite good.

The scientific and publication teams are working on pulling materials together and working on a publication plan for a large number of submissions over the upcoming years. And we're looking forward to being able to have a presence at the World Congress of Endometriosis.This is an important meeting that occurs every three years. We were at the meeting in 2008 in Melbourne, Australia, and we will be at the meeting in 2011 in Montpellier, France. It should be a good session there. We're looking forward to that very much so. So that's the elagolix program, end of Phase II, primary focus, Phase III initiation once we get buy-in by the FDA. As preparation for that our teams are rigorously working to qualify a large number of clinical sites for the Phase III trial here in North America. And as I mentioned, I'm getting the Phase I protocols approved and sites selected for the balance of the work that's necessary there. So I'm very happy with that collaboration.

Our other programs, of course, are keeping us busy. The VMAT2 inhibitor program, as you know, we were very pleased with the repeated dose safety and PK data in healthy volunteers and made the decision to proceed to an exploratory Phase IIA study in patients with moderate severity Tardive Dyskinesia. And that study was initiated end of year in Canada, where we have a CTA filed and approved. And we are actively dosing patients with NBI-98854 as we speak, and we look forward to seeing the results of this study as data become available. The anticipated timeline for sharing of data would be in the April timeframe if everything continues to go well with that study.

Our goal with this study again, you can read details of the trial design on www.clinicaltrials.gov. It's a very simple trial where a small number of patients escalate through three doses as tolerated. We have not designed the study to be a placebo-controlled trial or a P-value trial if you will. This is a trial that will give me a confidence that I know what doses are appropriate to take into a large, appropriately-powered Phase IIB study in the United States. I don't want to waste sample size on doses that are inappropriate, so this trial will help me come down on exactly what doses to take into the larger study.

If the Phase IIA study goes as planned and is informative, our goal is to have the IND open in the US and the Phase IIB study start after the IND is open.So that's going on and of course in the background all the supportive activities that normally take place with preclinical activities, extending the duration of toxicologic support so we can go into longer-term studies in patients, and some CMC activities, manufacturing activities looking at formulations that we'll take into bio-availability studies, et cetera. A lot of work by a hard-working team here in the clinical, and preclinical and manufacturing groups at Neurocrine.

The Urocortin 2 program is moving along nicely. As you know, we took advantage of a number of academic collaborations that we've developed over the years to help us further this program. The UNICORN study is the Phase II study in patients with acute decompensated heart failure being conducted in Christchurch, New Zealand. In this study was a trial of plan to enroll 50 patients who presented to the emergency room or coronary care unit with acute decompensated heart failure and compares to Urocortin 2 add-on versus placebo add-on to standard of care.

As of a little bit earlier this quarter, 39 subjects of the proposed 50 subjects had been enrolled and completed the trial, being conducted in a blinded fashion, so obviously we don't have any data at this point. The study also includes a subset of subjects predefined as 10 to 12 subjects undergoing right heart catheterization to further characterize the hemodynamic effects of Urocortin 2 infusions And we know that that subset has already been enrolled and undergone right heart catheterization.So, if things continue to go as planned, we look forward to data later this year from our colleagues in Christchurch, New Zealand, and obviously we will share that information as it becomes available.

Up in Scotland, at the University of Edinburgh, a number of very small Phase I and Phase II studies are planned. The Phase I studies have been initiated. These are specialized, forearm infusion trials to help characterize the effects of Urocortin 2 on a variety of vasculature biomarkers that will help improve our understanding of how best Urocortin can be used for various subpopulations of patients with heart failure and other cardiovascular disease. If you track the literature on Urocortin, you can appreciate there's been a real explosion of interest in this mechanism of action and understanding the underlying physiology of Urocortin in health and disease. There's literally hundreds of publications regarding this receptor and its biology that are available. So it's a very exciting time for this mechanism, and we look forward to sharing data later this year. So that's Urocortin 2.

As you know, we also tracked very carefully the NIH academic collaboration that is currently underway at Emory University and Mount Sinai with the CRF R-1 receptor antagonist 679, this is the drug that came out of the GSK/Neurocrine research collaboration. The drug is currently in these long-term academic investigations that we have.We know the studies are underway. We obviously are apprised of the enrollment of trials. But we're not managing these trials, and we are obviously not privy to the data or the observations from the trials at this time. The expectation is that enrollment will continue over the next year or two and results follow thereafter. Obviously if anything develops in the interim, we certainly can share that. But we will continue to track that as the psychiatrists continue their work looking at the effects of this antagonist in patients, in women with post-traumatic stress disorder.

I think that gives you a sense of what's happening in the clinical arena. Obviously the preclinical teams are very much involved in looking at a range of targets with our discovery group having at any given time five or six targets they are screening compounds for. And our goal is to continue to move things forward so that we can introduce some new compounds into the clinic in the near future.

I'll stop there and turn it back to Kevin and look forward to questions during the Q&A afterwards. Thanks for your attention

Thanks, Chris.

Also noteworthy is that our collaboration with Boehringer Ingelheim is going very well. Our research group is working very well with their research group over there and making great progress. As you heard from Chris, each one of our programs is proceeding to plan as we have laid out over each successive quarter. And in just the next very few months, we're going to have a number of value-driving events. The end of Phase II meeting and moving on from there, VMAT2's Phase IIA data and then opening the IND in the US. And then also towards summer is Urocortin 2 and the data from the Phase IIB trial that we have ongoing there. So quite a bit going on right now.

So, why don't we open it up for questions right now?

(Operator Instructions)

We'll take our first question from the site of Thomas Wei with Jaffray. Your line is open

Thanks. I had a couple questions on the European situation.

Can you just give us an update on when you or Abbott is planning to sit down with the MEA to talk about requirements for approval, and whether or not you need to have the EMA's input before trial?

Thanks, Tom. Abbott is driving this initiative. They have assembled an internal team at Abbott as well as some external advisors and are in the process of seeking scientific advice for the European development. That process is independent of the US Phase III trials, which is contingent upon just the FDA activities and specifically the end of Phase II meeting

And I guess a question on the VMAT2 program. Can you just give us a sense of an this AIMs end point. What might be considered a clinically meaningful effect? And how strong is the placebo response usually on that end point?

Sure. The AIMs is a composite instrument. If you look at the portion of interest, which looks at the dyskinetic movements in the face and the trunk and the limbs, and then there's also a score for how disabling those movements are.

We're looking at enrolling subjects that have a baseline score of at least 9. If you look at comparable studies with AIMs scores collected in a fairly rigorous manner, if you look at subjects with scores in the 8 to 9 to 10 range, if you have an effective intervention, you would expect to see at least a 30% to 40% improvement as kind of clinically meaningful or minimally clinically important change. That in my experience with this mechanism of action, I would expect something that, from our drug, in that kind of 40% to 50% range would be desirable.

Now the tricky bit about the placebo, obviously as I have mentioned already, this Phase IIA study we're doing is not a placebo-controlled trial, but for placebo-controlled trials with dyskensia, it really is a function of how rigorous the trial was in its design and it conduct.

And you can markedly decrease placebo effects, for example, by using a crossover design. You can -- If you have patients with very severe disease, you tend to see small placebo effects, so really his AIMs scores. If you have subjects with low AIM scores or mild symptoms, the placebo effect seems to be a little larger.

But it would not be uncommon, having said all that, to see a placebo effect in the 20% to 30% range in some of the published literature. But we're obviously working on what are the aspects of trial design and patient baseline characteristics that are necessary to minimize those placebo effects

Maybe just lastly back on elagolix, just an update on where does the whole preclinical package stand? Just an update on the reprotox and carcinogenicity studies and some of the these clinical things that you had talked about like drug/drug interactions. What needs to be done before you can start Phase III trials?

Sure. For the preclinical as we have said in the past, the bulk of the package is done. At this point, we have the two-year carcinogenicity studies in two species well underway. I think we're at months, gosh I don't know, 16, 17, somewhere in that range. So that study is going well.

As you know, the two-year carc study is a kind of a misnomer. It's two years of in-life for the animals and it's a thee-year package, but that's not rate-limiting for the NDA. That's moving well. And then the final reprotox study, the Seg III initiation was some time earlier this quarter. That's well underway. So that's the preclinical piece.

For the clinical, there are series of Phase I studies that are needed to round out the NDA. None of these are rate-limiting studies in terms of submission of the NDA, and they will all get done. They include a small Phase I study and hepatic impairment, in renal impairment, a couple of drug/drug interaction studies with birth control pills or other things, and a thorough QT study as well.

All of those are being done as collaborative efforts with Neurocrine and Abbott. None of them are rate-limiting, and all will be done in parallel with the Phase III studies

Thanks

And we'll move next to the site of Phil Nadeau with Cowen and Company. Your line is open

Good afternoon. Thank you for taking my questions.

My first is actually on the FDA meeting. Is there any part of the Phase III design where you feel you need input from the FDA at this point? Anything like size of trials? Patient population? Do you have any residual questions over the end points? What are the sensitivities at the end of the Phase II meeting?

Hi, Phil. Thanks. Obviously, the thing we have spoken about over the last couple years now, is we want to make sure that we have alignment with the co-primary end points for the trial.

We're very pleased with the modifications to the questions that we worked out with the FDA and tested in the 901 or Daisy PETAL study and with the outcome form that.

We're bringing that package of information to the FDA to get concurrents in an official PDUFA fashion that these are the scales and the analysis methods that will be appropriate for Phase III trials.

As far as the other questions, of course, we're interested in the FDA's input on all of that. But I say this with a smile. You always want to make sure you've checked off everything that's possible to increase comfort level and that there are no surprises.

Sample size I don't think is an issue. We're enrolling patients to meet ICH requirements more than we are for statistical power. We are -- We know what the population is in terms of the kind of inclusion criteria for endometriosis sufferers.

The main issues are just that we have a chance to discuss this with them and get concurrence on the end points and the stat methods for that. We'll take it from there

Okay. And thanks for that. That's very helpful.

My second question is just on the development of elagolix outside of endometriosis. Any update on those trials with those development plans?

The protocol planning is for uterine fibroids is well underway. We're in the process of -- As I mentioned earlier, we're doing site qualification for the Phase II endometriosis trials, which puts us in a position to see about getting sites lined up for the Phase II uterine fibroid trial.

That process is ongoing. Abbott is the one who is driving that, and we're playing the supportive role. The goal is to start uterine fibroids later this year, but I don't have any specific details on timing of that yet.

Okay. And then last, Tim one for you.

You mentioned that you expect milestones during the year. Can you give us maybe a little bit more color on exactly when those milestones will be recognized and what they will be recognized for? I don't seem to remember you getting --

We don't give out specifics on them, Phil, as far as what the milestones are related to, but suffice it to say for your modeling, I'd put them in the second half of the year.

Second half. Okay. That's great. Thank you

Thanks

It appears that we have no further questions at this time. I'd like to hand the call back over to the speakers for any closing remarks

Thank you very much. I really appreciate everyone joining us today. 2010 was really a culmination of several years of hard work and planning. It was a very successful year for us. Suffice it to say, all during that time, we planned on success throughout that, and so we hope this year to build on that success and have an equally productive year in 2011.

Once again I'd like to thank you all for your participation. Take care

This does conclude today's teleconference. Thank you for your participation. You may disconnect at any time. Have a wonderful evening.