Neurocrine Biosciences Inc (NBIX) 2013 Q3 法說會逐字稿

Good day, everyone and welcome to today's program. (Operator Instructions). Today's conference will be recorded. And at this time, it is my pleasure to turn the program over to Kevin Gorman. Please go ahead, sir.

Thank you very much and welcome, everyone to our third quarter earnings call. I'm joined with Chris O'Brien, our Chief Medical Officer and Tim Coughlin, our Chief Financial Officer. Before we get started, Jane, could you please 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 managements 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, if you could go over the Q3 financials and year-to-date performances.

Sure. Thanks, Kevin. Good afternoon, everyone. Thank you all for joining us. Today after the financial markets closed, we released our third quarter 2013 financial results.

Our loss for the third quarter was $0.17 per basic common share outstanding. Compared to $0.05 loss in the third quarter of 2012. Year-to-date, our loss is $0.53 versus $0.07 for the first three quarters of 2012. These financial results are consistent with results of the first two quarters of 2013. When comparing both the quarter and the year-to-date 2013 results, to those same periods in 2012, the major contributing factor for the change in net loss when comparing the two is a reduction in revenue earned under the collaboration agreement with both AbbVie and Boehringer Ingelheim. The active participatory portion of both these collaborations ended as planned during 2012.

Revenue for the third quarter was consistent with the first two quarters of the year at $700,000. Our revenue for the year will be $2.9 million. Research and development expense increased year-over-year primarily due to increased efforts around our VMAT2 program and general administrative expense was relatively unchanged across all of the periods presented. We remain in a very strong financial position ending the month of September with over $158 million in cash, investments and receivables.

As part of the quarterly release, we've updated our guidance for 2013. This is due primarily to three items. The results of our Phase IIb Kinect study which served to move certain costs into 2014, on-going cost mitigation efforts, and an increase in stock option activity which increased our year-end projected cash balance. We now expect to have a net loss for 2013 of approximately $46 million to $47 million. Our 2013 expenses should approximate $53 million to $54 million.

As a result of the previous mentioned stock option activity and lower anticipated expenses, we now expect to end the year with over $145 million in cash, investments, and receivables. With that, I'll turn it back over to Kevin and we'll entertain any financial questions during the Q&A.

Thank you, Tim. Before I turn over to Chris O'Brien to talk about the work that we're doing with our clinical and research programs, I just would like to state that AbbVie had its earnings call yesterday. They reiterated again that they're on track with the Phase III endometriosis trial, the first of the two Phase III trials that they have going. They say second half of 2014 is when they'll have top-line data on that, and that they have the on-going Phase IIB in uterine fibroids. We'll be happy to take any questions you have on that program. But now, Chris, you want to take over?

Yes, thanks, Kevin. Good afternoon. Thanks for participating in the call. Since our last call, we've been intensely focused on several activities around the VMAT2 program.

The first priority has been to complete the recruitment and randomization into the Kinect2 study. We have been successful in doing so. We closed screening for this program when we reached 203 subjects. Our goal, as you may recall was to randomize 90 subjects and we had anticipated a -- approximately a 50% screen fail rate which would give us our target but as you recall, in our Kinect study, the screen fail rate was slightly higher at the end so we allowed screening to go to just over 200 subjects. In fact, the screen fail rate was about 50% so we ended up randomizing 102 subjects into the Kinect2 trial.

That's fine. We're happy to have a slight over randomization in the subject number. We've been very happy with the conduct of the Kinect2 study so far. The protocol and the investigational drug appear to be well-tolerated. We've had a low discontinuation rate of a little under 20% to date. And the drug appears to be well tolerated with a fairly low reporting of adverse events.

Obviously we're blinded but we certainly know who was randomized, whether they were bipolar subjects or schizophrenia/schizoaffective disorder subjects. It appears that the adverse event reporting rate is approximately the same in the mood disorder/bipolar population as it is in the schizophrenia/schizoaffective population. Obviously we're stratifying randomization to placebo or active drug based on underlying diagnosis. So we take this reporting of AE to be a good indication that the mood disorder subjects are tolerating 98854 as well as the schizophrenia/schizoaffective disorder patients.

So that is a very important and very informative. As you recall, going into this trialthat was one of the unanswered questions that we had and that will be very important in determining what is the mix of patients that we put into our subsequent trials and whether we need to think about specific dosing differences for different populations. So that is going well. We also have a little bit of insight into how this trial is going.

As you recall, this is a titration trial. And so I have data that tells me what proportion of subjects are dose escalating at the week two and the week four visit. As you recall in a blinded fashion, subjects on placebo and on active drug, if they still have dyskinesia and are tolerating the study medication well, they're then advanced to the next dose so 25 milligrams, 50 milligrams or 75 milligrams accordingly. And at this point about 80% of the subjects at week two were advanced to the next possible dose and same thing we're seeing now at the week four visit, about 80% of the subjects are advancing to the next dose.

Obviously since we just completed the randomization process of 102 subjects the other day and we had quite a few subjects randomized at the end, there's still a significant number of subjects for whom I do not have information on those escalations because they're very early in the study process. But the study is going well. We're monitoring the safety labs and adverse events closely and our goal is to generate top-line results from the week six comparison of active to placebo change in AIMS later in December. As indicated earlier.

Now the one important thing about the Kinect2 study is that the study protocol was amended to have the primary end point be the change in the abnormal involuntary movement scale or AIMS when scored by an expert group of blinded central neurologists, with movement disorder expertise. The way this program works is very much like an oncology trial might work with an end point adjudication process. In this case, we have two movement disorder expert neurologists score the video aims examination at weeks two, four and si -- baseline two, four, and six. And if their scores do not meet the prescribed agreement, then there is an adjudication process, a third party comes in and the score is determined and so there is one score through this adjudication process done by the expert movement disorder central raters of the videos. And we're very -- this has come from a lot of hard work since our last conference call.

We focused a good portion of our efforts in understanding how best to score the tardive dyskinesia movements of these subjects, how best to utilize the video information, how best to utilize the raters, and how best to apply one of the widely-used modified AIMS if you will, to capture more consistent and reliable scoring methodology. We have engaged a group of expert tardive dyskinesia consultants and scoring experts, and are in the process of working with these individuals to help us get the most out of the Kinect2 study and subsequent trials. So that's going on.

At the same time, the Kinect2 study, completing its enrollment, we are now completing the Kinect study where we're waiting for the final subjects to complete their week 16 visit. You may recall that was a 12-week trial with active drug and then four weeks of no drug safety follow-up and the last patients -- subjects are just completing that week 16 safety follow-up. That data will then go through the data scrub QA process and then we will have, in December, results from the 12-week Kinect study followed by the week six Kinect2 study. So an intense amount of work going on on these programs. We've gained terrific insight into where these tardive dyskinesia patients are and have found ways to improve the efficiency of the recruitment and enrollment process and we'll be able to obviously take these learnings and apply them for future studies.

Speaking of future studies, so our goal, as you know, is to go on to another trial with the learnings from the Kinect2 study, specifically safety information for the bipolar subjects as well as the impact of titration on study outcome. In week 12 safety and persistence of efficacy effects from the Kinect study and the final readouts we're getting from some of our phase one studies, we completed, for example, our Ketoconazole DDI study. We've completed the hepatic impairment subjects in hepatic impairment, Phase I special population study and now we'll wait to complete the matched healthy volunteer subjects for that hepatic impairment trial. So we have a lot of data coming out in December.

This will help us determine the nature of the Kinect3 study or whatever we want to call the next project, that's probably what it is going to be. And this will help us make an informed decision about the study design, the population for enrollment, the doses used, and obviously we will be using the blinded central neurology expert as the AIMS raters. So that's the main clinical activity with VMAT2. We continue with the preclinical activity that will help support our initiatives in pediatrics for a Tourette's syndrome indication. Those are on track, on schedule as we've previously discussed. No new updates on those at the present time.

And I think Kevin, that's probably a summary for VMAT2 at the moment. I'll turn it back to you.

Thanks, Chris. So I'm open for your questions at this point in time.

(Operator Instructions). We'll go first to the site of Sara Slifka with Morgan Stanley. Your line is open. Please go ahead.

Hey, guys, thanks for taking my question. I had a couple of quick ones on elagolix. Regarding the second trial, it looks like on clin trials that that trial is listed as having a 12-month extension like the first trial. Do you have a sense as to whether the extension in the second trial is going to be needed for approval? And then secondly, there was initial talk about the possibility that the MEA might want an active controlled trial. Do you have any sense as to whether the two Phase III elagolix trials satisfied both the US and the EU? Thanks.

Thanks, Sara. This is Chris. My understanding of the second endometriosis trial is that 12-month follow-up period is the potential for follow-up. That the bulk of the off drug safety follow-up will come from the first pivotal trial which is primarily the US trial. The second trial is multinational, smaller in size. And not meant to be rate limiting. So I think the option there is that if it's needed, based on data from the first trial, then obviously it's available. But I don't think it's written in stone.

And as far as the EMA, that's something that you would have to ask AbbVie what their intent is there. Obviously most endometriosis -- most European trials for which there is a comparator, an active comparator trial is generally sought by EMA. In this case, AbbVie has not been specific as to their plans. These efforts, these two pivotal trials that are going on are meant to support the most important market opportunity which is here in the US.

Great. Thank you.

(Operator Instructions)We'll go next to Bert Hazlett with ROTH Capital. Your line is open.

Thanks. Thank you for taking the question. My question is regarding 854 and the question is with the low rate of AEs you've seen in Kinect 2 and the dose escalation data, does that bolster any thinking regarding moving toward the consideration of a higher dose as you move toward the Kinect3 study design with 854? Thanks very much.

I think that's a great question. That is exactly the kind of information we seek to get out of the Kinect2 study. You know, if you do the simple arithmetic, 100 patients, 80% of them escalate the first time and then 80% of those escalate the second time. You're going to have a spread of subjects at 25 milligrams, 50 milligrams, and 75 milligrams it may well be that the exposures we get at those doses have been optimized. We have a PKPD model we can plug into that will help us understand whether there is potential utility or even need to explore higher doses. We certainly have some room to look at higher doses in terms of tolerability as well as preclinical safety margin and we can build that into our next study if we want to. So we'll see.

The other interesting thing, obviously, is I'm very keen on seeing the week 12 data. If you go back to the clinical literature about the only other VMAT2 inhibitors that have been used in hyperkinetic movement disorders, tetrabenazine, you know that most of the clinical articles published by experts like Jankovik and others have been 12-week trials. So they're seeing their most robust effect after a few months of treatment. And there are some indication that, in fact, you have cumulative benefit over time at least based on that literature. I'm very keen to understand is there a difference between week two, week six, week eight and week 12 in our 12-week trial because in fact, if you have that good tolerability but an accumulation of benefit at even the lower doses, that could obviously help us very much in selecting doses for subsequent trials. So December will be a key month for us to get that data from both the titration and the 12-week Kinect study.

Just one quick follow-up with that. Would you expect to announce both of those -- both those results together?

I'm not sure we'll be so lucky. I think the Kinect 12 data will come slightly ahead of Kinect2 -- that the Kinect 12-week data will come slightly ahead of the Kinect2 later in December. So we'll -- obviously we'll get that out as soon as we can.

Thank you for the color.

We have no further questions at this time. I would like to turn the call back over to our hosts.

Thank you very much. Thank you all for joining us this afternoon. As you can see that we continue to be in a very secure cash position. We have well over three years of run rate in the bank.

And there's a wealth of data that as Chris has pointed out that will be coming through in just the next several weeks that we're going to be able to utilize. And all of the programming, all of the planning is being done now so that we can put these into our models and understand our drug even that much better so that we can design the next series of studies that are going to take place in this. So I want to thank you once again for your attention and we look forward to meeting you in the meetings in the rest of the year. Bye-bye.

This does conclude our presentation today, ladies and gentlemen. Thank you for joining us. You may disconnect at any time. Have a great day.