Neurocrine Biosciences Inc (NBIX) 2013 Q1 法說會逐字稿

Good day, everyone, and welcome to Neurocrine Biosciences reports first quarter 2013 financial results. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask 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. Please go ahead.

Please stand by while we await our speaker. Please go ahead, Mr. Gorman.

Thank you very much and we apologize for the slight glitch when the call started. Thank you all for joining us today. I'm here with Tim Coughlin, our CFO, and Chris O'Brien, our Chief Medical Officer. Today we're going to walk you through the financials for the first quarter and give you an update on our R&D programs. But first, Jane, could you please read our Safe Harbor statement?

Yes. Good afternoon. I want to remind you of Neurocrine's Safe Harbor caution. 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 filings may be obtained by visiting the Investor Relations page on the Company's website at 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. Kevin?

Thank you, Jane. Tim, we'll start with you.

Sure. Thanks, Kevin, and good afternoon everyone. Today we released our financial results for the first quarter of 2013. Our net loss for the quarter was $0.18 per share compared to a loss during the first quarter of 2012 of $0.01 per share. The main drivers of this difference in operating results were decreasing collaboration revenue under both the AbbVie and the Boehringer Ingelheim license agreements. The collaboration portion of both these agreements ended as planned during 2012. We remain on target for an annualized cash burn of $50 million to $55 million, consistent with the guidance provided at the beginning of the year. We ended the first quarter of 2013 with approximately $177 million in cash, investments, and receivables.

Revenue for the quarter was approximately $700,000. We expect revenue to remain at this level for the balance of the year. Recall, we are not expecting any milestones in 2013 under existing collaboration agreements. This milestone stream is anticipated to resume in 2014. Research and development expense increased first quarter 2013 over the first quarter of 2012 and from the last quarter of 2012 to this quarter. The main driver of this increase is a Phase IIb activity in our VMAT2 program. We expect R&D expense to continue to increase into the second quarter of 2013. General and administrative expenses decreased year-over-year and was flat from the fourth quarter of last year to the first quarter of this year. The decrease in G&A expense year-over-year is primarily due to continuing cost containment efforts and we expect G&A expense to remain at this approximate $3.4 million level for the remaining three quarters of the year.

Our financial guidance for the year remains unchanged. We expect approximately $3 million of revenue from upfront license fee amortization and expenses for 2013 should approximate $55 million to $60 million. Our net loss for 2013 is expected to be $50 million to $55 million. And we expect to end 2013 with in excess of $130 million in cash, investments, and receivables. Last thing I'll mention is our 10-Q will be on file today with the SEC for anybody looking for additional details.

I will now turn it back to Kevin for the balance of the call.

Thanks, Tim. Prior to turning it over to Chris, I'd like to give an overview of our two main programs. First, AbbVie has made significant progress with elagolix. Earlier this quarter, AbbVie achieved proof of concept in the large Phase IIa trial study in uterine fibroids and based this result, they moved the compound rapidly into a six-month Phase IIb study of approximately 280 women with uterine fibroids. They've stated that this study will complete in the second half of 2014 and they're positive they'll move into Phase III by the end of 2014. Now they are also on track with the Phase III endometriosis study and my understanding is they're very pleased with the conduct of that study to date and continue to anticipate topline data in Q1 of next year. We're fortunate to have AbbVie as a partner, they are proving their expertise and their dedication to this program.

Now changing over to our VMAT2 program that is also progressing well. We're very pleased with the conduct of each of the trials and Chris will go into more detail on that in a moment. Enrollment of these studies started out slower than we'd anticipated as we developed the learnings of how to reach these patients. We're now enrolling well in both trials and at this rate that we have, we will have topline data for Kinect in Q3 with Kinect 2 reading out shortly thereafter. We will request an end of Phase II meeting later this year and depending on FDA schedule, continue to anticipate that we'll hold that meeting prior to year end. Based on the data of the two Phase IIb studies, the program remains on track to start Phase III in the first half of next year.

Now with that overview, I'm going to turn it over to Chris.

Thanks very much, Kevin. Let me give you some detail on the Kinect and the Kinect 2 studies. Recall both studies are in patients who have moderate or severe tardive dyskinesia. The Kinect study is for TD patients whose underlying diagnosis is schizophrenia or schizoaffective disorder. The Kinect 2 study is patients with bipolar disorder, mood disorder, or reglan induced tardive dyskinesia.

The Kinect study is proceeding well. We have screened approximately 180 subjects at 40 sites as of this week and of these, 30 sites have 90 subjects who have either randomized or are awaiting randomization shortly. Once the last subject of this group is randomized, our topline data from the placebo-controlled portion of the trial will be available approximately 10 weeks later. At the current rate of subject qualification for the trial, we anticipate that a data readout in Q3 is as Kevin mentioned. We are very pleased with the quality control mechanisms that have been in place it in the Phase IIb studies. They appear to be performing exactly as anticipated.

We are enrolling only subject with moderate or severe tardive dyskinesia. And to date looking at the blinded baseline data that we have, the baseline mean score is approximately 15 so that's moderate to severe TD and the standard deviation that we see around that is under four points. So this is in keeping with our initial projections and the assumptions that we used in our sample size estimation and power calculations. Our stringent inclusion and exclusion criteria that we imposed because this is a critical Phase II study mean that many potential subjects with tardive dyskinesia have been excluded from enrollment into these trials.

So for example, we have patients with comorbid conditions that for Phase II we don't allow into the trial; people with hepatitis history, who have abnormal liver enzymes, people who have positive urine test for drugs of abuse. Obviously in Phase II, with an attempt to have a very tightly controlled study population where we get our initial read on dose response and safety profile, we're being very cautious about who gets allowed into the study so we've had to exclude patients with tardive dyskinesia from Phase II. It's

our goal with our development program and some of the other work that we're doing in conjunction with discussions with the FDA that we'll be able to address some of these exclusionary challenges so that by the time they get to Phase III, this gives us a little more flexibility and allows us to enroll a broader scope of patients.

Our safety profile continues to be very good. We've had no evidence of treatment-emergent laboratory abnormalities, ECG abnormalities, or serious adverse events. It's this electronic data capture that allows me to look at the blinded lab and adverse event data on an ongoing basis. And, of course, it's that electronic data capture which will allow us to go from last subject, last visit to topline results in just a few weeks rather than the longer time periods that previously we were stuck with.

The other interesting thing about that Kinect study is that the early termination rate is very low that is patients who discontinue participation in this study. Normally when you're dealing with schizophrenia patients with tardive dyskinesia, complex medical problems, you might assume that these subjects would have a high dropout rate particularly over a six or 12-week interval. But so far we've had seven subjects who have early terminated during the placebo controlled portion of the trial and two of these were due to adverse events. Both of these were patients who had schizophrenia symptoms, which led to their discontinuation. These were judged by the investigators not to be treatment related and obviously we're still blinded, we don't if they were on placebo or whether they were on active. But obviously, we're very happy with this very low discontinuation rate, very gratifying as to the conduct of the study and the appropriateness of the subjects that have been enrolled as well as the conduct that the investigators bring to the table. So that's the Kinect study marching along well, topline results in Q3.

The Kinect 2 study is also proceeding well, obviously it's a little earlier since that was the second study we started. We've screened approximately 45 subjects as of this week and that's actually in only 13 sites of our targeted 30 sites. We're still working with some of the sites to complete their local IRB review process or certification of the range, radar, et cetera. Of the 45 subjects that have been through screening, 26 subjects have been randomized or are awaiting randomization. And again in this trial like the Kinect study, once the last subject is randomized, about 10 weeks later we'll have topline results. And so, obviously, we will keep you informed when the last subject in the Kinect study is randomized and when the last subject in the Kinect 2 study is randomized and you can count out 10 weeks to your topline results.

It's a little too early to be precise on what we think the last randomization will be for the study, but as the study goes along, we'll get a better handle on that. We anticipate topline data shortly after the Kinect study reads out. Like the Kinect study, the Kinect 2 study safety profile to date has been very good. No evidence of treatment-emergent laboratory abnormalities, ECG abnormalities, or serious adverse events, and there have been no early terminations or dropouts to date in the Kinect 2 study.

It's been fascinating being part of this initiative. We are the first company to do very careful and large scale tardive dyskinesia studies for drug development and what we're finding is that there are many, many patients with tardive dyskinesia out there. Enrollment of these patients as subjects in a Phase II clinical trial is complicated and we're in the learning process. As Kevin mentioned early on, we were in the learning process trying to figure out how to find these subjects and investigators. Many of these subjects are socially isolated for example, and really who were the best investigators with whom to collaborate. Some investigators do a better job in Phase II trial setting for example. Those investigators that actually have their own database of their own patients are much more productive at enrollment than investigators who are schizophrenia clinical trial experts who reach out to community to find patients.

So this will help us as we shape our plans for the larger Phase III studies.

We've encountered a high prevalence of comorbid conditions in these patients and as I mentioned; hepatitis, the drugs of abuse, prohibited (inaudible). We're putting in place all the steps that we need to try to avoid these challenges as rate limiting in future studies and obviously we're coordinating our discussions with the FDA to that end. In addition to the work getting us to Phase III next year, we're involved deeply across several disciplined functional groups here at Neurocrine. In quantitative market research, working with marketing, commercial activities, clinical group, finance group, et cetera; and we will plan on sharing this quantitative market research with our investor community as the data emerges.

So I think I'll pause there and turn it back to Kevin and I look forward to some questions and discussion.

Thanks, Chris. So I hope that that gives a lot of color to you now for the first time on these studies and how well they are going with this. So at this point, I would like to open it up for your questions, please.

(Operator Instructions) Sara Slifka, Morgan Stanley

Hi, guys. Thanks for taking my question. Actually I had two. First on 854, can you remind us where you are with any preclinical carc work and any PT work, and then what was required in terms with tetrabenazinein these two areas? And then secondly just on uterine fibroids, I know you guys are using or AbbVie's using alkaline hematin to measure blood loss, Lupron's showing I think about 80% plus reduction blood loss on [PVAc]. So it looks like those two measurements don't necessarily always correlate so with regards to alkaline hematin, what do you see as a good benefit and what do you think that AbbVie needed or wanted to see in order to move into the Phase IIb? Thanks.

Thanks, Sara. So let me start with the tetrabenazine, fourth question first. So the preclinical program is fairly extensive in what's been accomplished to date. We're in the middle of our long-term tox studies and obviously we have not started the carcinogenicity study yet, but we'll be continuing our discussions with the FDA as far as what they need and want. We've had a very productive set of interactions with them in that regard so far. And our carc program is not going to be rate limiting or critical path in us getting to NDA filing so that's all good.

With respect to tQT, thorough QT studies, we have built in a lot of QTc assessment in our program in our Phase I work, 12-lead digital holter analysis by outside experts, et cetera; but we have not conducted the thorough QT study yet and the reason for this is very straightforward. You need to know what your clinical dose is so then you can calculate the doses to take into the tQT trial, both the expected dose and a simple therapeutic dose and so once the 12/01 Kinect reads out, we'll be in a position to have those discussions. We've already begun the process of setting up the tQT study working with outside vendors and cardiologists so we'll be in a good position to get that study started. My goal is to have data from the tQT study around the time of the start of the Phase III study so that should be well in hand.

You asked about what Xenazine was required to do for its approval here in the US. They did thorough QT study as you know, showed a small prolongation of QTc in that trial and that led to the labeling black box warning that includes the risk of QTc prolongation. The advice to be very cautious about using Xenazine in patients who are on anti-psychotics, particularly those that have an associated risk of QTc prolongation. And let's see what -- did you ask about -- oh yes, about carc in tetrabenazine. So yes, they did carcinogenicity studies and that information if you're interested is obviously available in the Xenazine review documents that the FDA has on file at their website.

Now with respect to uterine fibroids, obviously we can't speak to a lot of the details on the AbbVie program as we've said all along. But the literature is quite clear that the alkaline hematin method and the pictorial blood assessment method for looking at blood loss -- uterine blood loss, they actually correlate very well. They're different numbers I mean in terms of percent blood reduction and amount of blood, how many milliliters; but they actually correlate very well. And it's my understanding that actually AbbVie in their Phase IIb study has both alkaline hematin and pictorial methods built into the trial, but I would have to go back and look at clinicaltrials.gov to confirm that. They correlate well and as far as what amount of reduction the FDA wants, I don't think AbbVie has shared that with anyone and I'm certainly not in a position to say what is clinically meaningful.

Great. Thanks so much.

Thank you. Marko Kozul, Leerink Swann.

Hi. Thanks for taking my questions. This is Irene in for Marko. On elagolix and endometriosis, can you talk about the enrollment pace for the Phase III trial and what are you seeing seen from the 160 centers?

So what AbbVie has shared with us is they're very happy with the conduct of the Phase III endometriosis trial that they're on track for reporting topline results in Q1 of 2014 as Kevin mentioned. And I think -- I'm glad that you actually brought this up, this is a good example of in the early days we were running endometriosis trials, no one knew how to reach these patients for enrollment into Phase II. We did a lot of work on figuring out how to do patient recruitment and we went from very slow recruitment in the early Phase II studies to very rapid recruitment in the Daisy PETAL study because we had figured that out; how to use Facebook, what not to do on TV, what to do with radio, what kind of wording and imagery to use, et cetera. And that's what's happening now with our tardive dyskinesia, no one's ever figured this out before, we're making the learnings as we go and I think what you'll see is as our early Phase II program progresses into Phase III, you'll see a refinement in the ability to reach out to these patients. But AbbVie has been very happy with the results as I say and they say they're on track.

Thanks very much. Just one next question for uterine fibroids, can you talk about the Phase IIb trial to find terms of the similarities and that brings us to the Phase IIa like patient inclusion-exclusion criteria, rationale behind the choice of background and amount of doses?

I'm not in a position to do that. Unfortunately as we've had to say along, this is AbbVie's programs, it's not our program. We don't have the details to answer those questions directly.

And actually one of the reasons why we chose AbbVie as a partner was that their extensive experience and expertise in uterine fibroids. We never treated a US patient in our entire 1,000 patients that we treated. So that was probably a much better question to be directed then to AbbVie.

Thanks very much. That's helpful. Thank you.

Thank you. (Operator Instructions) Yale Jen, ROTH Capital.

Good afternoon, gentlemen, and thanks for taking the questions. First is for the endometriosis the second Phase III study, is that still scheduled to start again in mid-'13? Do you have any colors on that?

I think that the last public statements that AbbVie made on that would be they didn't say actually mid, they said that it would be in the second half of 2013 I think is what they last publicly stated.

Okay, great. And the second question is that it looks like that both for Kinect and Kinect 2 that roughly 50% of the patients screened will be ultimately randomized. Is that what you anticipated before and is it something that you see that continuing particularly in Kinect 2?

So that's a good observation, Yale. Thanks. We did plan about a 50% screen fail rate. What we didn't fully understand is what is the nature of screen failure and I think it's proven to be an interesting thing. It depends on many things. It depends on who the investigators are, where they draw their patients from as potential subjects, and the nature of the reason for screen failure. So sites that have their own patients that are in the clinic that the investigator works, they tend to fail for different reasons than sites that are standalone schizophrenia trial centers that are trying to get patients from the community physicians. And so we'll obviously use this information going forward as we design our Phase III trials and our recruitment methods. But I would anticipate we'll continue with about a 50% screen fail rate in the Kinect 2 study as we've seen in the Kinect study.

And the second to the last question is that given that the data release seems slightly pushed to third quarter for the Kinect, do you still feel comfortable that the Kinect 2 data will come out in time for potentially at the end of Phase II meetings in the fourth quarter of this year?

Yes, I do. And from early indications, as I said, it's a little early in the Kinect 2 to be very precise, but that study seems to be going well. We actually took some learnings from the Kinect study as far as which investigators we were working with and are using those who have more direct access to patients so that's going well. And I think what we've seen to date, I mean the numbers that we have in Kinect 2 is that at this point just 13 sites have actually randomized subjects and we're planning on having all 30 sites up and running and randomizing. So I think we'll see a nice up slope there that will keep us in good standing.

And last question here is that you thought of some market analysis for the TD market. Do you have anything you can share at this moment in terms of what your current sort of view in terms of market size and other details?

Yale, this is Tim. We're still -- we've done some qualitative work and what we're embarking on right now is some quantitative work. And what the qualitative showed us is we've got basically a population of 0.5 million people here to treat. The quantitative work so far is supporting that, but it's too early and what we want to do is get a complete picture to provide a breakdown for everyone along underlying diseases, what the patient population looks like, the payer population et cetera. So when that date is all collected which will be later this year, we'll share a full picture -- complete picture with the Street.

Okay, great. Thanks a lot and congrats on the results.

Thanks, Yale.

Thank you. It appears we have no further questions at this time, I'll turn it back to Kevin Gorman.

Thank you very much and thank you everyone for your participation today. We are very enthusiastic about the programs that we have going and the way these programs are moving forward. Speaking specifically to VMAT2, we're highly confident that we have the right mechanism in order to treat multiple movement disorders. We're also very confident that we have the right compound in 98854. What we needed to have in these studies is the appropriate patient population and also have an appropriate administration of the aims scoring system and we feel very good right now with both of these studies that we're achieving those also. So looking forward to sharing that data with you a little later this year.

So with that, we'll be seeing you at several meetings coming up and also happy to field any calls or emails that you might want to send in. Thank you.

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