Neurocrine Biosciences Inc (NBIX) 2012 Q1 法說會逐字稿

Good day everyone, and welcome to Neurocrine Biosciences reports first quarter 2012 results. At this time, all participants are in a listen-only mode. Later you will have an opportunity to ask a questions during the Q&A session. (Operator Instructions). Please note, this call is being recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Kevin Gorman, President and CEO of Neurocrine Biosciences. Please go ahead sir.

Thank you. Good afternoon everyone. Welcome to our call. Today I am joined by Chris O'Brien, our Chief Medical Officer, and Tim Coughlin, our Chief Financial Officer. Before we get started, I would like for Jane Sorenson to read our Safe Harbor statement.

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 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 Neurocrine.com.

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

Thank you, Jane. We have had a real productive first quarter here at Neurocrine, particularly in our VMAT program, and everything moving forward with the Elagolix program. We have also hit our numbers right on spot for guidance that we gave at the beginning of the year, so what we will do today is Tim will take you through our financials in more detail, and Chris can give you a brief update on each of the programs, then I would like to turn it over to the rest of you to answer any of the questions that you may have, so without further adieu, Tim.

Thank you Kevin, and good afternoon everyone. Today we released our financial results for first quarter of 2012. We again met our financial plan for the quarter, losing a penny per common share outstanding. This compares to $0.05 of income per share for the first quarter of 2011. The main difference is in the financial results from quarter-to-quarter are lower income realized under the Abbott collaboration, coupled with higher research and development costs, primarily related to our VMAT2 program. We remain on target for a annualized cash burn from operations of $40 million to $45 million, consistent with the guidance that we provided at the beginning of this year.

Revenues for the first quarter of 2012 were $11.3 million compared to $12.5 million for the first quarter of 2011. The decrease in revenue is attributable to clinical and preclinical efforts around Elagolix which continue to transfer to Abbott. We expect revenue recognized under these collaboration agreements with Abbott and BI, to continue to decline throughout the year.

Research and development expenses increased quarter-over-quarter. The main driver of this increase is activity in our VMAT2 program which continues to move forward in Phase II studies, as well as drug product manufacturing, drug packaging for future clinical studies, and the battery of preclinical work to support longer term dosing, and the ultimate NDA filing. Additionally, utilization of external experts and external in vivo studies for some of our early research programs also contributed to the increase in R&D expense. Personnel expense on both the R&D and G&A expense lines increased from 2011 to 2012. The main driver of this increase was higher non-cash stocked based compensation costs, related to options granted during 2011 and 2012. Stock-based compensation expense increased approximately $700,000 company-wide quarter-over-quarter. $300,000 of this increase is in research and development expense, and $400,000 was reflected in general and administrative. The Company continues to believe that options are an extremely effective mechanism to align employee and shareholder interests.

Overall for the quarter, expenses were in line with our expectations and budget. We expect research and development expenses to increase as the year progresses, and general and administrative expenses to remain relatively flat through the year. We began 2012 with approximately $132 million in cash, investments, and receivables. In January, we placed 10.9 million shares of stock with high quality investors, and yielded $83 million in net proceeds to the Company. The funds raised from the offering were offset by a cash burn from operations of approximately $11 million in the first quarter, yielding approximately $203 million in cash investments and receivables of March 31, 2012.

That concludes our prepared remarks on the financials. For those looking for more information, our 10-Q is on file with the SEC, and with that, I will turn it back over to Kevin and Chris.

Thanks, Tim. We are in a strong financial position right now and as always, we are going to stay very vigilant on our burn going forward. Chris, how about a brief update on the programs?

Thanks, Kevin. Good afternoon to the listeners on the call. With our Elagolix program in collaboration with Abbott, very pleased with the progress that has been made, particularly in recent weeks. Abbott conducted a very successful investigator meeting, which is the kick-off for the Phase 3 endometriosis program, and as they announced they expect to be screening subjects for the Phase 3 endometriosis trial within the next few weeks. So very good progress on what is going to be a very large study. Details of that study and the study design ultimately will be available on clinicaltrials.gov.

Abbott is also continuing to remain on track, recruiting through their uterine fibroids Phase II program, and that study is going to plan, and we look forward to some data updates later this year as they have previously stated. In-house, our efforts are obviously focused intensely on the VMAT2 program. As you know from our last conference call and press release, we had data from our 1101 Phase II trial with our study drug 854 for patients to moderate to severe tardive dyskinesia. That trial provided us data that allowed us to see that we had achieved proof of concept particularly with the 50 million-gram dose, and the data from that trial has allowed us to move forward toward the next Phase II study.

Now we just had a very good discussion with the FDA with respect to our preclinical program and the data that we have been generating. This data this is now sufficient to support the plan, the long-term Phase II trial that we have been talking about, so we are very pleased with our interactions with the FDA in that respect. We're using the data from the Phase II 1101 study to help us with refinements to protocol design and dose selection, and we are on track to start the 12-week trial in patients with moderate to severe tardive dyskinesia, these are schizophrenia patients or those with affective disorder, we hope to start the trial in July mid-summer as previously discussed, and look forward to telling you about the conduct of that trial as we go along. That is the VMAT2 program.

Literally as we are speaking, this week we are just getting some information from the cardiologist in New Zealand with the availability of some preliminary data this week, and we look to being able to summarize this information for people next week, once we get all of the data, and get our hands around the summary. So that is the update, Elagolix with Abbott for endometriosis and uterine fibroids, VMAT2 on track, good meeting with FDA, about to start the large Phase II tardive dyskinesia study, and urocortin 2 data coming in the next literally days.

Thanks, Chris. I would like to now open it up to questions at this point.

(Operator Instructions). Our first question comes from Thomas Wei with Jefferies.

Thanks. I just wanted to confirm that there actually is a signed SPA between Abbott and the FDA for endometriosis?

Abbott has had an SPA that as you know they submitted. They are starting their Phase 3 trial currently without a signature on that document, but they had completed their discussions, so they were satisfied in order to go ahead. I think as far as details about their plans for those kinds of SPA activities, you would need to ask Abbott for actual details since it is not in our regulatory purview right now.

So but is your understanding that the plan is to formalize that into an actual SPA agreement?

I mean, that has been the plan, I just can't tell you anything about the status of that other than that the protocol is final and the study is starting.

Okay, that is helpful. And the fibroids trial, is that still on track for data in the third quarter?

I think that Abbott has already said by end of year. I don't know if I have ever seen any quarter announcements, but absolutely the study is on track. Their recruiting going very nicely, and the conduct of the study is going quite well.

And then for VMAT2, have you had any additional thoughts on readjudicating the data in different ways, either to look at the entire set of data yourself, and use the videos to rescore the whole lot of patients, or to even submit the whole set of data to an independent reader to do that?

Yes, as we mentioned on the prior call, we have an external independent rater reviewing all of the videos, and that information will be I think useful to us, as we think about training methods and videotaping methods in our future trials.

When do you think you would have an update for us on what the rescored data looks like with the independent readers reading?

Well, the reading, the video reviews, there are hundreds of them so that is still going on. I don't know whether we have ever said anything specifically about a date, or reporting this information. I think my comment at the last call was we are going to try to get the most out of this information for going forward, but because we had gotten what we needed, namely proof of reasonable affect from the 50 milligram dose, we wouldn't necessarily anticipate reporting out this outside read. Just to make clear a point that I hope I made last time.

There is a difference between a video, a rating of a videotaped exam versus clinicians doing the rating, and what we are learning is that the quality of video is variable. We are getting our hands around that, so that we have a much improved 12-week study going forward. If there is something interesting from the independent rater, I would be happy to talk about it. I just don't have any timelines or specific details to offer on that, and clearly that won't change our path going forward, just refine what we do in the next study.

Great. Thanks for taking my questions.

Of course.

Thank you. Our next question comes from Ian Somaiya with Piper Jaffray. Please go ahead.

Thanks. Just a question on the uterine fibroid Phase II study. Can you just walk us through the design of the study, what should give us a confidence on a positive outcome? Ultimately, what do you hope to learn from this trial, and what are the likely next steps? Are we looking potentially at a Phase 3 program next year in uterine fibroids, or are there are intermediate steps that need to be taken?

Thanks again. So let me preface my comment by saying that we are not the uterine fibroid experts, obviously that is why we partnered with Abbott. So my facility with UF compared to endometriosis is a little bit less. Having said that, the Phase II study that Abbott is running is a proof of concept study that was designed to look at a range of doses in a series of sequential cohorts, and allow them to make decisions about what studies come next. Do you need another Phase II study, do you go right to Phase 3? It's my understanding at least that is what Abbott plans to get out of this current study.

You asked an interesting question. You said what do people expect to see? In terms of efficacy and the basis for a Phase II uterine fibroid study? We know from the endometriosis population, that a range of Elagolix doses have a marked effect on reducing uterine bleeding. Now of course, these are women with endometriosis, but we also see this with healthy volunteers with a reduction of normal menstrual activity. The expectation is because of the very targeted GnRH effects on estrogen, and progesterone and estrogen, that there will be a reduction in uterine bleeding in women who are enrolled, because they have very heavily uterine bleeding due to fibroids. The expectation is they will have a marked reduction in uterine bleeding. That is an easy one. I don't think there is any uncertainty that you will be able to see a reduction in uterine bleeding. The real question is what is the best dose, what is the duration of treatment, and what are the pieces needed for a good NDA package for an indication of uterine fibroids. I am not terribly concerned about can you show efficacy, I think it is the whole spectrum of these other questions that Abbott will be working on and focused on, making their decision of what study comes next.

If I could just ask a follow-up. When we think about the endometriosis data and maybe also the evaluation of the drug in normal healthy volunteers, how immediate was the reduction in bleeding? I guess there is good confidence in this indication. Just curious how immediate is the symptom relief?

Since most women don't have uterine bleeding but once every 28 days for several days at a time, normally you need to look at a cycle. And because women have different cycling lengths, you need at least six weeks before you see an impact. Obviously, the affects of Elagolix on hormones begin within a day, and that is why with, for example, non-menstrual pelvic pain in endometriosis suffers, you can see beneficial affects within days, but when you are actually measuring a change in menstrual flow, this study has to be long enough to capture at least one menses cycle. Now as a proof of concept study, the uterine fibroid study that Abbott is conducting is a 3-month treatment cycle, after collecting baseline uterine bleeding data for at least two months. You have a baseline of a couple of cycles, you have treatment of three months, and then you have a post treatment follow-up period.

Given the information that we already have on-hand, I am assuming you have an adequate safety data package in order to move forward. Just curious if there is a scenario where you could move into Phase 3 trial in uterine fibroid next year?

Obviously, that is Abbott's decision.

If Is it conceivable? Of course. What kind of data would a big pharma want to have in hand before they initiate to a Phase 3? It depends on what they see, what they think the dose is going to be, and what additional safety and duration of treatment data they would need for an NDA.

Thank you very much.

Thank you. Our next question comes from Phil Nadeau from Cowen and Company. Please go ahead.

Good afternoon. Thank you for taking my question. First, a follow-up to Thomas' question. Since it has been four or five weeks that you have had the VMAT data, has your thinking of what happened in that single trial site evolved at all, or do you have any better explanation for why inconsistent results were seen at that site?

I think the comments that we made last time, Phil, still hold, that it is clear that the scores that were recorded for the AIMS bear very little relationship to what is evident on the video, and as far as why these subjects got enrolled, how they got the scores they did, that is still part of this assessment that is ongoing.

Okay, great. Then on Urocortin 2 data, could you remind us what end point is there, and give us some sense of what possible next steps could be?

The study is plenty at the Cardio Endocrine Group in Christchurch New Zealand was running. They called it a pilot study for acute decompensated heart failure patients. Their primary focus, Dr. Richards and the team there has been the neuroendocrine hormonal aspects of acute decompensated heart failure. In this trial they measured a lot of things. They measured a whole range of hormone levels. They had a subset of 20 subjects who underwent right heart catheterization, looking at cardiac output and pulmonary wedge pressure. They measured patient symptoms, dyspnea, as well as a whole range of clinical chemistries, hematology, and other vital signs. So in the way they wrote the protocol, they did not prespecify a primary end point. They called it a pilot study. The first time this ADHF population were studied, so they are going to report out on a whole range of things as Imentioned. Hemo dynamics, neuroendocrine values, and other factors.

Phil, also, then to answer going forward, this is just not a core program for us, hasn't been for a number of years, so we are not going have any more spend on this program, depending on what data looks like, we will put the requisite amount of effort into looking for a partner for this data, so as we get it, we will share it with those companies who have shown an interest in wanting to hear about it, and then we will see where it goes from there.

One more thing, Phil. This study is a randomized placebo controlled trial, so the 50 patients that we were randomized, were randomized to either standard care plus a 4-hour placebo infusion, or standard of care plus a four-hour Urocortin infusion, and they were all followed for a total of 24 hours. That is the data we will be able to report out, as soon as we sort through it.

That is great. That is very helpful. Thanks for taking my questions.

Thank you.

(Operator Instructions). We will go next to Robyn Karnauskas with Deutsche Bank. Please go ahead.

Hey guys, Leith for Robyn. Congrats on the progress with Elagolix and VMAT during the quarter. Two questions if I could by any chance. One, wanted to get your prospective on Watson's Esmya that is moving into Phase 3, and how your proposition differs from that?

Then the second quick follow-on would be, have you had any evolution what you are thinking about specifically in like the redesign of the VMAT, like anything from just initial thoughts you have, and the assessment that you have made beyond what you were saying initially in the last call? Thanks.

Thanks for those. As far as the selective progestin receptor modulator that you are talking about, sorry, you said Esmya, sorry. For uterine fibroids and the program, I don't have enough detail really to speak to that. It is my understanding that the trials that were done to get the progesterone approved in Europe are not at all similar to the trials that the FDA would require here in the US for the drug to be approved. In particular, chronic long-term use of unopposed estrogen therapy like this progesterone, will require a lot of long term safety data, endometrial biopsies, and extensive efforts that I don't think are a part of that trial that are referring to, and I also understand that there is no patent protection for that drug here in the US, so I am not really sure what the future of that is, but that would probably be a good question to ask to the Abbott or Abbott colleagues since that is their area of expertise.

As far as the learnings from the VMAT program, I think you heard my comments a couple of minutes ago about using data from the 1101 study, but I can tell you what is perhaps even more important for what we are focused on today is the design and the conduct of the 1201 trial, which is the internal number that we have for the 12-week study that is coming up, and we are very focused on aspects of how the AIMS examination is conducted, scored, and monitored. If you are interested, I will fill in a few details about the study.

Definitely.

For one thing, we are using an external independent expert to assess whether the subject qualifies for this study, so the severity of the patient's tardive dyskinesia is going to be qualified as being moderate to severe or not, by an independent expert external reviewer. The investigator at the investigator's sight, we will have two. One, the individual who interacts with the patient with the subject, finds out about how they are doing, conducts the safety assessments, hears about the adverse events, et cetera, reviews the clinical laboratories, the ECGs, et cetera. That is the treating investigator. We will have a separate independent rating investigator that is not responsible for patient or subject interactions otherwise.

This is way of helping keep some of the objectivity, and reduce some of the empathy and bonding that sometimes occurs that sometimes contributes to placebo effects. We have an external reviewer that qualifies the subject as having moderate or severe, then at the site we have the treating investigator, and we have the site-based independent rater who conducts the AIMS exam. Furthermore, the AIMS examines are videoed, and we have a quality process that reviews the videos, and makes sure that the AIMS exam and the videos are being conducted properly through the conduct of the study. So a whole series of quality controls that we are building in to make sure that we don't have any of the difficulties that we ran into last time.

Great. Thanks.

Thank you. It appears we have no further questions at this time. I would like to turn it back to Kevin Gorman for any closing remarks.

Thank you all very much. We appreciate your attention. We appreciate your questions. So in summary, with a nice healthy balance sheet that we are going to protect, we plan on using that to push our portfolio programs forward quickly, in particular our VMAT2 program, and add to our pipeline.

As we receive information from Abbott on the Elagolix program, both for endometriosis and for uterine fibroids, we will be passing that information on to you, as time goes on. Once again, thank you very much, and as always we look forward to getting with each of you at upcoming meetings, and also we are available here to discuss further. Thank you very much, and have a good afternoon.

This concludes today's program. We do appreciate your participation. You may disconnect at any time, and have a great day.