Neurocrine Biosciences Inc (NBIX) 2011 Q1 法說會逐字稿

Good day, everyone, and welcome to today's conference. (Operator Instructions). It is now my pleasure to turn the conference over to the President and CEO of Neurocrine Biosciences Mr. Kevin Gorman. Please go ahead, sir.

Thank you very much, and welcome, everyone. I'm joined today with Tim Coughlin, our CFO and Chris O'Brien our Chief Medical Officer. Before we start out Tim will read the Safe Harbor statement.

Good morning. I want to remind you of Neurocrine's Safe Harbor cautions. Certain statements made in the course of this conference call related to 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 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.

Thanks, Tim. I would like to start out by apologizing for the short notice for this call. We normally give you all at least a week's notice of the time and date of the call. What we wanted to make certain of before we scheduled the call is that we had our minutes from the FDA from our end of Phase II meeting on Elagolix and we did receive those late last week, and we will be talking about that. That was a very good meeting that we had with the agency, and Chris O'Brien is going to give more color to that. However, right now let's start out with Tim running through the financials for us.

Thank you, Kevin. Good morning, again. Yesterday after market closed we results for the first quarter of 2011. It was another good quarter. We met our financial plan for the first three months of 2011 and are on target for both annual net income of $34 million to $39 million and a net cash burn of $3 million to $6 million for 2011. This is consistent with the guidance we provided at the beginning of the year.

Our net income for the first quarter was $2.9 million or $0.05 per share compared to a net loss of $8.6 million or $0.19 loss per share for the first quarter of 2010. This $11 million change in operating results is directly attributable to revenue earned under the Abbott and Boehringer Ingelheim collaboration agreements that we entered into during the second quarter of 2010. Revenue under the collaboration agreements was $12.5 million for the first quarter of 2011 compared to $0.8 million for the first quarter of 2010.

Amortization of up front fees accounted for $9.2 million of revenue in 2011. Additionally, we recognized $3.3 million in sponsored research and development funding consisting of FTE support and reimbursement of external development expenses. Research and development expenses and general and administrative expenses were in-line with our expectations. These expenses are also consistent with our 2010 expense levels.

Recall that in 2009 we implemented our last significant round of Company-wide cost controls. By the first quarter of 2010 most of our expense mitigation strategies had been fully implemented and the expense reductions realized. So the fix the cost portion of our expenses shows minimal change period-over-period. However, one of our variable expense items in research and development, specifically our external development expenses decreased period-over-period.

External spending in the Elagolix program decreased $2.2 million in the first quarter of 2010 to $1.1 million in the first quarter of 2011 reflecting a shift of responsibilities for the Elagolix program from Neurocrine to Abbott. This Elagolix related cost savings was offset by increase in external development spending on our VMAT2 program which increased from approximately $100,000 in 2010 to $800,000 in 2011. We expect the external development costs for VMAT2 to continue to increase during the balance of the year.

From a balance sheet perspective we ended the quarter with approximately $125 million in cash, investments and receivables. At March 31, 2011 our investments were in fixed income highly rated commercial paper and corporate debt instruments that we have laddered from a maturity standpoint. The average maturity of these investments is approximately four months and we have no investments in maturities over a year. For those looking for additional financial details our 10-Q is now on file with the SEC.

That concludes our prepared remarks on the financials. We would be glad to entertain any financial related questions later in the call and with that I will turn it back over to Kevin.

Thanks, Tim. So as you can see, we are right on track with our guidance for the quarter and continue to be on track for the entire year. It has been a real good quarter for us from an R&D perspective not only with the end of Phase II meeting, but also the results we spoke of earlier in the quarter on our first foray into patients with our VMAT2 program and the lead compound there NBI-98854. Right now I would like to turn it over to Chris and he can give you more detail on these two programs, and in addition give us an update on our Urocortin 2 program. Chris?

Thanks, Kevin. Happy to give an update on these projects. Things are moving quite nicely. The Elagolix collaboration with Abbott is moving full force with multiple initiatives for Elagolix into endometriosis in Phase III, Elagolix into Uterine Fibroid in Phase II and myriad supportive studies that will round out ultimately the NDA for submission. The end of Phase II meeting held on March 28 with the FDA was a productive meeting. It was a very positive meeting and this particular division has been engaged and consistent in their device recommendations and support for novel therapies in this space, namely endometriosis. Most importantly, I think for us and for Abbott is that we were able to confirm that the co-primary endpoints measuring dysmenorrhea, that is menstrual pain, and non-menstrual pelvic pain on a daily basis continued to be the endpoints that the FDA that is interested in seeing used for registration trials. And as I think most people are aware, we have had considerable experience with these co-primary daily scales as evidenced by the previously reported 901 study.

This was the Phase II data reported last year that showed very nice separation of Elagolix from placebo and had very good dynamic range and response characteristics, et cetera. So having the FDA confirm that, indeed, this is the correct way to move into Phase III was obviously very reassuring. In addition, broad agreement was reached on how one deals with these endpoints, namely the kinds of statistical tools that are appropriate and in general we had very good discussions about applying these methods and how to take these going forward.

The balance of the discussion at the end of Phase II was focused on the adequacy of the pre-clinical package, namely all of the toxicology and all of the supportive studies that have been done, confirming, indeed, that the package that has been proposed and the studies that have been completed will be appropriate for the NDA. We also spoke in some detail about the overall design of the Phase III trials in endometriosis, in particular confirming again that pivotal trials six months in duration with placebo control are appropriate, and we had some additional discussion about the inclusion/exclusion criteria, about the numbers of subjects in the trial et cetera.

All these details that are in Abbott's hands now are in the finalization process for the protocols, and we are working towards implementing these Phase III trials as soon as final agreement for finalization of these protocols is in place. As you might imagine this is a very large Phase III program with an extended amount of work necessary to get hundreds and hundreds of clinical research sites qualified, and contracts in place, and recruitment strategies in place and the institutional review boards approval in place, et cetera, et cetera. So that is going full force now with collaboration between both Neurocrine and Abbott to get these sites qualified and up and running.

So we are planning, obviously, for things to go smoothly and if everything goes according to plan, we would be looking to begin Phase III trials later this year. Obviously finalization of the protocols between Abbott and FDA is a critical piece to that.

The Uterine Fibroids program is one the protocols are being finalized now and the sites identified for running these trials. The goal is to have this first Phase II study in Uterine Fibroid begin sometime in third quarter of this year.

So, very productive, very nice interaction. I was delighted to have the Abbott team now enjoy the same productive and supportive relationship that we have had with this division at the FDA as they drive this program forward;really get to take advantage of such a productive thing and supportive relationship. So that is the Elagolix project and GnRH program.

We are, as Kevin mentioned, very excited about the increased activities surrounding our VMAT2 inhibitor program. NBI-98854, or in our short hand, 854, is moving forward to entering Phase II study here in the United States.

As you know, we did our first Phase I trials under a CTA in Canada due to some of the rapidity with which these trials can be done under the clinical trial agreement or CTA. We were able to get those up and running and working with one of our preferred providers in Phase I units, actually two different ones, and then the Phase IIa exploratory study which we reported on some weeks ago. This was also done under CTA in Canada with one of the world's experts in Tardive Dyskinesia and their institution where there were a number of patients with Tardive Dyskinesia that were qualified for rapid enrollment in that exploratory study.

So we had used that Canadian process to get the preliminary data package in hand while some additional CMC and pre-clinical work were being conducted by my colleagues here at Neurocrine, and with this package we then submit a meeting request to the FDA where we can meet with the division to discuss opening the IND in the United States. And in this case the IND would enable starting the first US trial, in our case a Phase II cross-over trial in patients with moderate to severe Tardive Dyskinesia.

So the FDA responded to our request and we have a meeting coming up with the division in June. And assuming that things go well at that pre-IND meeting, the IND would then be opened shortly thereafter. Then our goal is to be able to start the Phase II cross-over trial here in the US in the fall of this year.

The Phase II crossover trial will be a placebo-controlled comparison of two weeks of dosing with active, in random order, in a group of approximately 32 patients with Schizophrenia or Schizoaffective disorder who have had Tardive Dyskinesia caused by their antipsychotic medication. We will propose that we continue to use the abnormal involuntary movement scale, or AIMS, as the primary end point as long with a clinician global impression scale for Tardive Dyskinesia, and a variety of secondary assessments along with the usual safety assessments, pharmacokinetic data collection and some other measures.

Now we like the cross-over trial design because it uses a within patient comparison, minimizes some of the variability that one can see in small Phase II trials and allows us to confirm some of the details we need in hand as we prepare for the larger, longer duration parallel group trial in which we plan on initiating early in 2012. So all this activity obviously is moving quickly, we are very pleased with the results we have seen in Phase I and Phase IIa trials from Canada, and we are very pleased to be setting up for our meeting with the FDA in June to open the IND. Looking forward to starting the crossover trial in the fall.

In the background, of course, our pre-clinical group here at Neurocrine will continue to set up and run the necessary supportive studies that will allow us to do the long-term Phase II trials in 2012, so mainly the three-month toxicology studies in animals as well as some additional CMC work for solid dose formulation that allows us to move the program ahead.

So very nice progress in the VMAT2 program, very happy with the results that we reported earlier, namely the robust reduction in disconnect movements in the patients with moderate to severe Tardive Dyskinesia, and a safety profile that was very consistent with what we had hoped for, namely minimal side effects, no safety signals from laboratory or ECG data and a PK profile that was exactly what we had designed when we set out to start this program. So that is VMAT2.

And next is the Urocortin 2 program. As most of our listeners and investors know, this project is now in a Phase II trial in patients with Acute Decompensated Heart Failure. It is a single center trial being run by the cardioendocrine group at the University of Otago in Christchurch, New Zealand. This project is designed to, for the first time, look at infusions of Urocortin 2 in patients that show up in the emergency room or intensive care unit with acute worsening of their heart failure and a fluid overload status with shortness of breath and decompensated hemodynamic state.

This trial was designed to enroll 50 subjects, and as of my last conversation with the team there, they have completed enrollment of 43 subjects and are in the process of recruiting the balance of the 50 planned. As a single center project this is something that will probably take another six to eight weeks, but obviously, is subject to the ebb and flow of patients.

And unfortunately for our friends in Christchurch, earthquakes and major disasters has had a major impact on the hospital there in Christchurch, and obviously, the people in the community. So, our admiration and thanks to the team in Christchurch for continuing to move the science forward in the setting of unbelievable catastrophe that has afflicted the region.

So this trial should finish up in the summer given those predictions, and once the data goes through it's scrubbing process and data analysis, we should be able to report the results, again as planned sometime in third quarter, but again, it depends on how the enrollment and data analysis process goes. But on track for that, so far no unusual safety signals or problems in this blinded study and we are very excited to see what the data has to review.

So good progress on these three fronts, the GnRH program with Elagolix and Abbott, the VMAT 2 program here at Neurocrine and the Urocortin 2 program with the college at Christchurch, New Zealand in the Acute Decompensated patients. I think at this point I will pause, turn it back to Kevin and I look forward to your questions in a few minutes. Thanks.

Thanks, Chris. So as you heard from Chris, we did have an extremely good end of Phase II meeting. The agency remains very engaged and they continue to communicate very well and very clearly with us. And as Chris said, it was a real pleasure to see that the collegial atmosphere, the clarity of communication was retained now that Abbott is actually the leader in this program with the agency.

I would also like to say that Abbott did an outstanding job in preparation for this meeting which is one of the primary reasons that it went so well. It was an extensive document that Abbott prepared. I thought the questions that they posed to the agency were spot on. It led to very good discussions which we anticipate that as Abbott continues to work with the agency in finalizing the protocols will lead to real good agreements there. But as Chris also said, we came out of that meeting with broad agreements on virtually every aspect of the clinical and pre-clinical program and moving forward. So, at this point in time, I would like to open it up for your questions.

(Operator Instructions). We will take your first question from Jon LaCroy with Hapoalim. Please go ahead.

Hey. Thanks for taking my call. My first question is what doses are you using in the Phase III endometriosis trials and then also in the Phase II fibroid trial?

Thanks, Jon. So as you know, in the Phase II program the dose the we had in the 901 study was 150-milligrams once daily and that will also be used in the Phase III trials. We do have some options of potentially adding a second dose arm in some of the Phase III work that is under review right now, but the main dose is the 150-milligram dose.

We have not discussed the Phase II Uterine Fibroids dosing publicly and this is up to Abbott. Obviously, it will be posted on clinicaltrials.gov when we get there, but I think in general terms, you can say that we certainly have an understanding of the range of doses that are associated with modulation of estrogen and other bio-markers.

The first Uterine Fibroid study is expected to be a study that explores a range of doses, and this would give us some idea of whether the same dose is necessary for Uterine Fibroids, were used with endometriosis, or we need to explore something a little more broadly.

The population of patients with Uterine Fibroids tend to be older than women with endometriosis. So, in contrast to the 30-year old endometriosis sufferer, the Uterine Fibroid subject that might be a candidate for Elagolix typically are in their mid-40s. This may have some impact on dosing as well as the extent of suppression of estradiol necessary to reduce the uterine bleeding that is typically the primary end point in these trials. So that work will be coming along, and you will hear more about that as it unfolds.

Okay. And then can you talk a little bit about the responder analysis versus maybe what other endpoint you could have used and why that is an advantage?

In the 901 study when we reported the results, you may recall that we reported the co-primary endpoints in two ways. We talked about a mean change from baseline, so we compared the changed scores in the placebo and Elagolix group, and we also reported the proportion of women that were responders as judged by a specific amount of change in their co-primary endpoint scales. And so for example, you remember the critical piece there in the 901 data was that we had about twice as many responders in the Elagolix group as we did in the placebo group. And using in that case in the 901 data, we had a threshold for the responder definition that was at least a 30% reduction in chronic non-menstrual pelvic pain, for example. So, that's the kind of responder analysis which we have been discussing with the FDA.

We like responder analysis because they are clinically very understandable. When you talk about a mean change score of 1.2 on a scale that is something that is often hard to get your hands around as a clinician. But when you say twice as many women were responders and had a clinically meaningful improvement in their pain, that is something that is very easy to understand, and I think this particular division has always appreciated that responder analysis is able to convey that information.

So that is an advantage. Either method, either a mean change from baseline or a responder analysis is a statistical assessment that works. We can could do them either way. There is no significant difference in sample size needs or power in these types of studies we are doing, but from the clinical interpretation and communication, our responder analysis is a very powerful method.

Okay. Great, thanks.

Thank you. We will take our next question from Jason Napodano with Zacks. Please go ahead.

Good morning, everyone. When you look at what Lupron costs for three months, I think it is around $2,000 or so per shot, that would suggest to me some pretty strong pricing power for Elagolix. Obviously it is early to start talking about price, but I'm wondering if Abbott has conducted any pricing studies or any market research studies that you can share with us?

Jason, thanks for the question. Yes, Abbott's marketing group has been fully engaged in this. They have begun quite a few market research studies whole initiative around this. But you are right when you started out, it is premature to talk about pricing here. It is a first in class therapy. And so Abbott will be going through at the appropriate times, both with physicians and then with payors, and doing their pricing work.

Okay. And just the way Lupron is prescribed it's not recommended for more than six months. Do you see a similar six month on, three months off dosing for Elagolix in the real world setting?

Well, Lupron can't be used because for more than two six month settings because of the black box warning associated with it for bone loss. As you know, from the data that we've generated throughout our Phase II program, we have minimal if any bone loss at the 150-milligram dose. So part and parcel of the Phase III trials are going if to be around length and duration of dosing with this drug.

To try draw a distinction though, I think as we said all along, we don't look at Lupron as being a competitor or comparator in this marketplace. It is so sparsely used within endometriosis that it hardly hits the patient population at all. Obviously the goal here for Elagolix and everything that we have done to date, suggests that this will have broad adoption throughout the endometriosis population.

Got you. Appreciate it, guys. Thank you.

Thank you.

Thank you. (Operator Instructions). We will take our next question from Nick Bishop with Cowen and Company. Please go ahead.

Good morning and thanks for taking my questions. First I had a couple of questions about the Phase III Elagolix design. First, can you compare and contrast for us what you know so far about the primary and any secondary endpoints in Phase III as compared to the Daisy Petal trial? Second, can you give us any ballpark of the number of patients thinking about? Is it the low thousands, high thousands, more than that? And finally, how long trial likely to last and when do you think we might see data?

Sure. Thanks, Nick. In reverse order, we have said throughout our discussions about the Phase III program that the Phase III trials will contribute a large number to the NDA's safety population. So to meet ICH guidelines these are big studies. They are many hundreds of subjects. The exact final number is something that is still being discussed between Abbott and the FDA, and will be locked in place, obviously, before the trials start later this year.

But large numbers somewhere in the range of many hundreds to a thousand would be a reasonable estimate. Of course, there will be two pivotal trials to meet FDA guidelines, and for the primary registration trials we are talking about two six month placebo controlled trials with some additional detail to follow once those are finalized. Let's see, there was a third part to your question.

Yes. About how long do you think the trial will take to complete?

Oh. So that will be an interesting question, and that feasibility work is being looked at right now by Abbott. But you can imagine with hundreds of centers in the US and outside of the US and a six month treatment duration, you are probably looking at a two year window from pulling the trigger on starting the trials to the 12 to 18 months of recruitment and running the trials, and then final closeout and wrap-up of the data. So somewhere in that time window I think is a reasonable estimate.

Obviously that is an estimate. This is something that given the magnitude of the studies no one has ever done such large endometriosis trials as part of a Phase III program before. So this will be a learning opportunity for both Abbott and Neurocrine. We will get a better handle on that once the trials are up and running.

Okay. Great. Thanks, that's helpful. And then one other question on the Phase III Elagolix development. Do you have any clarity at this stage of what the plans are in Europe, and will the current Phase III trials be potentially supportive of a filing there?

So Abbott is intensely working on the European side to this, obviously, interested in this being a global initiative for Elagolix in as many countries as is appropriate. The details of what Europe needs remain to be worked out.

One thing you can say is, obviously, the US trials will be supportive of any European initiative. The main difference, of course, is typically the EMA requires -- they don't like placebo controlled trials as their registration trials. They typically like active comparative trials, and so there is a process where a sponsor, in this case Abbott, would engage the European countries and EMA, and discussion through scientific advice while they work out those details. That is obviously something going on in parallel with the primary USA initiative.

Okay. And just one last quick one if I could. On the Phase II Fibroids trial can you give any guidance on about how long that trial is likely to last and when we might see some results?

I think Abbott will come out with the details of the trials as the protocols get finalized and you would expect to see them post it on clinical trials.govonce we get there. I think in a general sense, however, it is fair to say that these trials are, the early Phase II studies, typically are in the three month range and they are moderate sized Phase II studies, so if we start this year, this is something that we would hope to be able to complete the trials in a year's time frame. But I really can't speak to details on that since it is an Abbott initiative.

Okay. Thanks very much.

Well, thank you very much for your attention this morning. This is about all the time that we have this morning. As you can see, it really has been a very good quarter for us yet again. There is a lot going on at Neurocrine both in these programs that we have spoken about and in others.

And in closing I would just like to say that the end of Phase II meeting really was a demarcation in the Elagolix program. This is where there was a true handing off of the program, and Abbot truly taking the lead of this. A fully engaged partner in putting all of it's resources towards this program.

We are working closely with them to assist them in any way that we can as we move forward. As you know, it is a deep collaboration with them, but our partner truly has taken ownership of this program and I can't be happier with the way that they are conducting the program at this time.

On a final note, Tim and I are in Boston, we are at the Deutsche Bank conference today, and I will be speaking from the podium at approximately 10.40 AM ET, so that we can go over some things -- East Coast time, 10.40 AM -- so we can go over things that maybe we didn't touch upon at this call. Once again, thank you very much for your attention and we look forward to talking to you all in the future. Bye bye.

This concludes our teleconference. You may disconnect at anytime. Thank you for joining and have a wonderful day.