Neurocrine Biosciences Inc (NBIX) 2014 Q2 法說會逐字稿

Good day everyone, and welcome to the Neurocrine Biosciences second quarter earnings call. At this time, all participants are in a listen-only mode. (Operator Instructions). It's now my pleasure to turn the conference over to Kevin Gorman, President and CEO. Please go ahead, sir.

Thank you, and good morning everyone. It's a pleasure to be here this morning to talk about our Q2 earnings and update you on the programs. With me this morning Tim Coughlin, our CFO, and Chris O'Brien, our Chief Medical Officer. We will be going over the financials, and then we will give you an update on our R&D programs. But before we do that, Jane, could you please read our Safe Harbor statement?

Yes. Good morning. I want to remind you of Neurocrine's Safe Harbor cautions. Certain statements made during the course of this conference 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. Our financials are right in line with guidance. And Tim, why don't you take everyone through it?

Sure. Thanks, Kevin. And good morning to everyone. I appreciate you joining us for our second quarter earnings call today. Our second quarter of 2014 again met our financial plan, with a net loss in the quarter of $13.4 million, or $0.18, per common share outstanding. Our second quarter loss did increase over the first quarter loss of 2014, and we expect this trend to continue through the year. Research and development costs will increase as a result of initiating Phase III development of our VMAT2 inhibitor NBI-98854 in tardive dyskinesia, as well as the commencement of our clinical efforts of the same compound in Tourette's syndrome.

Additionally, there are other compounds for different targets in separate diseases in earlier stages of pre-clinical work that are being shipped to GLP for pre-clinical studies. These GLP studies are significantly more expensive than our non-GLP testing.

Our year-to-date loss is $25.2 million, or $0.35 per share. This compares to $24.3 million, or $0.36 per share, in the first half of 2013. The increase in year-to-date net loss over the prior year is primarily driven by an increase of share-based compensation expense of $2.4 million when compared to the first six months of 2013 and a decrease in revenue under licensee amortization of $1.4 million. This was offset by lower development costs, which were reduced by $3.8 million for the first half of 2014 comparing it to 2013.

As already mentioned, these external development costs such as pre-clinical GLP testing, GMP manufacturing of API and finished direct product, clinical trial-related expenditures et cetera will rise through the rest of 2014 and continue to increase into 2015. While we expect our research and development costs to increase steadily throughout the rest of the year, we expect our G&A costs to remain relatively constant at $4.2 million per quarter for the balance of 2014, or approximately $17 million for the entire year of 2014. In 2015, we expect G&A costs to rise, as our commercial efforts related to VMAT2 will begin in earnest.

Our cash position remains strong, ending the second quarter with over a $0.25 billion in the bank. We will end 2014 with at least $230 million in cash and investments, with no debt. We filed our 10-Q yesterday after market close, and that filing contains additional information about the quarter.

I tried to keep my comments brief. It's a relatively straightforward quarter from a financial standpoint. I'll be glad to entertain any questions in Q&A, but for now I'll turn it back over to Kevin.

Thank you, Tim. So Chris is now going to talk about our pipeline, particularly VMAT2. You know that the end of June, we had an end of Phase II meeting with the FDA and I'm pleased to say that was a very collaborative and very productive meeting that we had. You've read the highlights in the press release and now Chris is going to go through some details for you.

Thanks, Kevin, and good morning to the participants. Thanks for calling in today.

As Kevin pointed out, at the very end of June we had our type B meeting, that end of Phase II meeting with the FDA and the division that, participants, the review team were very engaged. We got detailed preliminary written comments before the meeting in response to our briefing package, and we had an opportunity to focus on the important topics at the end of Phase II meeting. We got our official meeting minutes back a couple of days ago and that allowed us now to have this call.

The key take-homes from the meeting were after extensive review of the clinical data that we had in hand to-date, namely the Phase I and Phase II studies that have been completed, as well as the supportive pre-clinical and manufacturing data, we reached a good understanding with the division of what they need to see in an NDA application for tardive dyskinesia. And to satisfy that NDA requirement, we will be conducting a single pivotal clinical trial, Phase III trial with a placebo control in tardive dyskinesia, and in discussing the nature of that trial, the protocol includes several important key features.

One is we had agreement on the population of patients. The patients that will be enrolled in Phase III are identical to the patients that were enrolled in the Kinect 2 study, with one exception. Only a few patients with tardive dyskinesia due to metoclopramide exposure in patients with gastrointestinal disease, and at the FDA's request, we will not include GI patients in the Phase III trial. That's a minor point because the use of metoclopramide cause and subsequent TD has plummeted since the FDA's release of the black box warnings about metoclopramide and its TD risk. So we will be focused on patients with schizophrenia, schizoaffective disorder, bipolar disorder, depressive disorder, and neuroleptic-induced tardive dyskinesia of moderate to severe intensity, exactly like we enrolled in Kinect 2.

The second point that we have firm agreement is that the primary end point is a case and baseline in AIMS as measured by the central raters. This is exactly what we did in Kinect 2, we will do this in Kinect 3.

Third point of discussion and agreement is for the dose and the dose regiment of NBI-98854. We will -- as mentioned, I think, in an earlier call, we had done extensive exposure response analyses with the data that we had from our Phase II trials, and I mentioned at that time we were very comfortable that we knew the kinds of exposures that were necessary for a robust clinical response. And as you recall, we've had experience with dosing inpatients between 12.5mg per day up to 100mg per day for at least two weeks, and that we had seen the most robust efficacy in the 50mg to 75mg dose range. And with our extensive exposure-response modeling, with the help of some FDA consultants, the final doses chosen for Phase III were 40mg and 80mg. So we will have a randomized, double-blind, placebo-controlled, parallel-group six-dose trial -- that is, patient also be randomized to either placebo, 40mg or 80mg, and the comparison will be the AIMS change from baseline at the end of the placebo-controlled trial compared to active placebo. Very straightforward study design, very straightforward statistical approach, very straightforward dosing.

Now, one key point for this drug and this indication is that we want to add to our extensive safety database, and so we'll do that in two ways. Patients in the placebo-controlled trial will continue on active drug out to the end of the year. What that means is that patients on 40 or 80mg who have been randomized at baseline to one of those doses will continue on those doses in a blinded fashion, and patients who were initially randomized to placebo will be randomized in a blinded fashion to either 40mg or 80mg for the remainder of the active portion. So it's not an open label extension. It's a blinded active drug extension out to the end of the year. That will give us one year data for a large group of patients, 240 patients will be randomized, and this will give us some good safety data, blinded safety data at 40mg and 80mg.

In addition to the placebo-controlled trial, Kinect3, we'll also be running in parallel an open label safety trial with those two doses in a group of subjects, getting close to 150 subject in an open label safety trial, although that number is not that critical. It will be over 100 subjects, but we'll allow almost like an open access trial, if you will, in subjects with moderate to severe TD. So this will give us a good number of subjects with up to one year of continuous treatment.

Alongside the pivotal trial and the open label safety trial, we have some additional Phase I work that we will conduct. As I've mentioned on previous calls, we will run a thorough QT study. We will run a special population study in patients with renal impairment. We will run another drug/drug interaction study. We've already done a couple, we have another one to do to satisfy the standard requirements for a full new chemical entity, a new indication program for tardive dyskinesia.

So a very good discussion with the FDA. As I said, they were very engaged, they had some very good suggestions with us, but we were very pleased with the meeting and its outcome, and we've, we already mobilized a lot of the forces to get this process going in advance of the meeting, waiting for the final meeting minutes to confirm what we understood to be the path forward, and now that is happening in earnest. We have already qualified close to 70 of the 80 clinical sites that will run this trial in North America. We have very good investigators. Approximately, a quarter of those investigators are high-performing Kinect 2 investigators, and then we have some additional new sites that we've brought onboard. We're gearing up to have all the contracts done and the IRB documents in place such that we can begin screening patients in September, with randomization occurring in October.

We believe the total duration of this trial, if you include both the treatment and the recruitment phase, I'm going to go out on a limb and say it's about an 18-month endeavor, which allows us to keep to our projected timeline of NDA filing in 2016. The open label safety trial will run concurrently starting probably in Q1, and that trial doesn't have to -- we don't have to complete all subjects through one year. What we'll have is a cutoff date, and we will take all of the safety data up through one year in the subjects who are reached that cutoff date so that we don't compromise the NDA filing time that we've talked about.

Obviously, in parallel with the clinical work, the Phase I studies, the Phase III studies, will be the completion of our pre-clinical package, the two-year carcinogenicity study has been kicked off and we have, as Kevin has mentioned, some GMP manufacturing campaigns that are underway for commercial validation lots and all the supplies not only necessary for the completion of these studies, but to prepare us for a potential launch of the product, once approved.

While all that work is doing on in tardive dyskinesia, we have also been working very hard on our pediatric program, NBI-98854, also used for the treatment of tick disorder and Tourette's syndrome, and we had a very productive interaction with the FDA, allowing us to pull together what the agency needs for us filing the new IND, so this will be a separate IND for Tourette's syndrome from the tardive dyskinesia IND. That document obvious includes a lot of work around what does the pediatric clinic trials look like, what does the development program look like, what does the pre-clinical juvenile toxicology data show, how do we do dose selection in a pediatric population, and all the PKPD exposure modeling that we've done to help us select what we believe will be safe and effective exposures in children down to the age of 6.

So that's a lot of work that goes into that IND package. We have the electronic publishing of that package going on as we speak, and that IND will be actually be submitted to the FDA within the next few days, once the publishing is finished. It's actually a large amount of work. The team has been very busy with the IND submission, in conjunction with the tardive dyskinesia activity.

The clinical group here at Neurocrine is small. We're about 20 people, and everybody is all hands on deck to get this done. That's the update on the tardive dyskinesia and Tourette's syndrome program. Obviously, we're very excited about our current progress and very excited about what's coming over the upcoming months.

While that's going on, I think some of you are aware that we've had our twice a year meeting with our colleagues at AbbVie, the Elagolix program, and the Neurocrine team went up to Chicago and met with our AbbVie colleagues. And they give us an update on all of the things going on with Elagolix. As you'll recall, we're not involved in the day-to-day operations of that program, so we get a twice a year update. And we're very pleased, at multiple levels, with what's happening. There's a massive investment of people and resources into the Elagolix program, for both the endometriosis Phase III program and the uterine fibroid Phase II program -- not just the clinical efforts, but the kind of commercial efforts for market research and all the health economics and outcomes research that AbbVie is very good at. They are putting a huge initiative behind looking at things like quality of life and productivity, and that sort of thing.

So the endometriosis studies include the two Phase III trials. The first trial, the Violet Petal study, is on track. They have obviously completed randomization across 875 subjects, the largest endometriosis trial ever conducted in the history of drug development. This trial, if things go as planned, as you know there's the six-month placebo controlled trial, the last patient, the last to use it, will be in November, and then AbbVie does their normal process of data cleaning q-and-a, et cetera, then data analysis, and sometime in that December/January timeframe will be a reporting of the top line results. Those details remain to be worked out, and obviously, that's AbbVie's call when that happens.

That's very exciting, the end of year readout to the Violet Petal study. And meanwhile, the Violet Petal study, as you're aware, that's a North American trial, Canada, US, Puerto Rico, and the Solstice study is a international trial with a number of countries, including the US participating in that study. That's a slightly smaller study, about 788 subjects, I think, in that trial, but nearly identical design, and both studies use the same co-primary endpoints of dysmenorrhea and non-menstrual pain, measured with a daily diary as the the primary end point. That's what we used in the 901 or the so-called Daisy Petal Study. So, very excited. Looking forward to the results from that trial at the turn of the year.

So I think I'll stop there with the discussion. You've heard about VMAT2, you've heard about Kinect 3. We've heard about AbbVie and Elagolix. We're continuing to make progress with our discovery research and pre-clinical programs. The two programs that are in later stage pre-clinical are continuing to survive the gauntlet of toxicology, which is obviously quite a severe hurdle to overcome. If they continue to do well and finish up the work this year, then we look forward to talking to you about the IND for those CNS-oriented compounds entering humans in 2015.

So I'll turn it back to Kevin.

Thanks, Chris. Just to add on to what Chris was saying about the VMAT program in parallel with the clinical team's discussion with the FDA. There's been CMC discussions the FDA and those are all progressing well with no issues going on there. So the CMC is tightly buttoned up also. As far as the AbbVie meeting went with, also I'm pleased to say we were there as they were closing in on the agreement for the acquisition of Shire, and there certainly doesn't appear to be any distractions from the team or any movement within the team thus far based on that acquisition.

So with that, I would like to open it up for questions.

(Operator Instructions). And we'll take our first question from Robyn Karnauskas from Deutsche Bank. Please go ahead, your line is open.

This is Mohit for Robyn. Thank you for taking my question and congratulation on the progress. So my first question is I just wanted to learn about your discussions with AbbVie around the fact that one clinical trial will be sufficient for the filing. What did AbbVie comment around that?

Most of the comments were based on the understanding of what constitutes adequate well controlled trials, and we reviewed the Kinect 2 results and obviously that was a very robust trial conducted in a manner that could be considered adequate and well-controlled. Obviously, that's subject to the normal scrutiny and review that occurred at the time of the NDA. So you are also waiting for their final detailed review that occurs after the NDA submission, but the Kinect2 study could constitute one adequate well-controlled trial.

All right, that's helpful. Will thereby be a dose escalation phase in this Phase III trial or all patient also start on fixed-dose on day one?

It's a fixed-dose parallel group trial.

Got it. The last one, just wanted to make sure I got it right on the Violet Petal study. The timelines for the third readout are the end of 2014 and AbbVie will communicate to the Street, right?

That's correct. AbbVie will communicate with the Street once they've gone through their regular customary process of cleaning the database and locking it and then unbinding. We imagine that that's going to be somewhere at the very end of the year or early next year in January, but again, that timing completely up to AbbVie, and we're in discussions with them on the extent of the disclosure that they will be giving and providing to the Street at that point in time.

Great, thank you. Thank you for the update. Thank you.

And we will take the next question from [indiscernible] with Cowen. Please go ahead. Your line is open.

Hello, and thank you for taking my question, and congratulations on that progress. I was hoping for a bit more clarity on the choice of dose for Phase III, in particular in the light of Kinect data and the 50mg dose to a 100mg dose and the variability of the times within the trial. So is it -- why is the safety profile looks pretty good even at a 100mg, why not go for a higher dose. And also what should we expect from the 40mg dose in the Phase II trial?

So a couple of things, just to comment about use of the word variability. In these studies, the variability that we start with sometime with sorting out is not related to a drug. The variability -- because our drug is very predictable, PK is very nice, good bioavailability, good predictable exposure. The variability comes in the struggle in the early Phase II studies was around who was doing the AIMS and how they did it. And that s what we spent so much time working on, and why we ended up with the blinded central video raters that we used in Kinect 2 and that we will use in Kinect III. So once that s done, the variability goes away.

Secondly also to the other point, we spent extensive effort of viewing our exposure response data and working with our FDA consultants, we found that we had a very clear story that is you need a certain amount of exposure to get a response. And if you are going to be a responder, you respond robustly once you have that exposure. It is very clear that as you go up on exposure for example, exposure seen with doses of 100mg, you get no incremental benefit, no additional benefit. You just get more exposure, and at a small level, although the drug was, as you said, reasonably well tolerated, we see some signs that kind of exposure for a long-term usage is probably not warranted or appropriate.

But the main driver of our dose selection is that exposures over 75mg or 80mg don t get you anything, you don t get additional benefit. And for tardive dyskinesia, what you see is somewhere in the range of 60% of subjects become profound responders, with a marked reduction in tardive dyskinesia. And you get some percentage of patients, 20% of patients who are kind of non-responders, and about 10% of patients somewhere in that range, 10% or 20%, are partial responders. But increasing exposure doesn�t change that once you get over a certain threshold.

What we found is that the FDA really wants to see a minimal effective dose and maximal effective dose. And what we were able to show them with our data is that patients getting dosed at 25mg are comparable to placebo. At 50mg yes we have a good number of responders, but not the maximum number of responders. Once you get up to that 75mg, 80mg exposure range, you are pretty much maxed out. And so that s why we were able to reach an agreement with them that we with our data from Phase II and with additional data from these two doses at Phase III, we will have a complete spectrum of minimal effective dose and maximal effective dose. And 100mg doesn�t get you any more, 25mg is like placebo, and 40mg and 80mg are perfect balance.

Thank you very much. That's very helpful. And so what were to happen -- you have to keep both doses? What if something that happens to the 40mg dose?

That�s a good point. We do not have to get both doses.

Oh, okay.

Our expectation is that we will do our hypothesis testing with the 80mg dose first, and then with the 40mg dose second. And we do not have to hit both.

Okay. So if were the 40 milligram to fail, you still can file with 80mg?

Yes.

Okay, that's really helpful. Thank you very much.

It appears we have no further questions at this time. I'll turn the program back over to the presenters for closing remarks.

Yes, thank you very much everyone for joining us this morning.

Just to sum up, as you can see, we are real pleased with the outcome of our end of Phase II meeting. The hard work that the clinical group put in the Phase I and Phase II portions of this program have really paid off, and the agency appreciated that. With fast track, it allows us to have continued communication with the division, and to, again, build on the relationship that we have with that division. As Chris said there, they are very engaged and very communicative at this point.

So, and obviously we have a big data event with AbbVie that s coming up at the end of the year and so we are very much looking forward to that. So, over the next six months, we are going to look forward to seeing you. We have a number of conferences -- Morgan Stanley in September and Nomura in early November, Jefferies over in London in mid-November, and then Piper and Deutsche Bank and Oppenheimer going through the rest of November and December, and then finally JP Morgan in January.

So, at all those conferences, we are going to be able to keep you I think quite up to date with the lot of communication and disclosures from the Company as we move forward with these programs and others. So, with that I thank you very much for your attention and look forward to meeting with all of you in the coming months.

This concludes today's program. Thank you for your participation.