Neurocrine Biosciences Inc (NBIX) 2014 Q3 法說會逐字稿

Good day, everyone, and welcome to Neurocrine Third-Quarter Earnings call. It's now my pleasure to turn the conference over to Kevin Gorman, President and CEO of Neurocrine Biosciences. Please go ahead.

Thank you. Welcome, everyone. Before we get started, Jane Sorensen is going to read our Safe Harbor Statement.

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 of 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. I am joined with Tim Coughlin, our CFO, and Chris O'Brien, our Chief Medical Officer today. As usual, we're going to go over the financials which are very much in line with expectations and our guidance, and then we'll do a brief update of all the programs.

What I'd like to start off by saying is that we have had significant progress in virtually all of our programs coming into this, especially with the news that we released last week on getting the break through therapy designation from the FDA. And so Chris will be able to go over that and answer any of the questions that you might have on exactly what does break through therapy mean, and what does it do for the program.

So let's start out. Tim, could you take us over the financials, please?

Sure. Thanks, Kevin, and good afternoon, everyone.

Thank you for joining us on this third-quarter earnings call. My comments will be brief, as the quarter was straightforward and right on our financial plan.

Neurocrine had net loss for the quarter of $15.9 million or $0.21 per share based on approximately 76 million shares outstanding. Our 2014 year-to-date loss is just over $41 million or $0.56 per share compared to a year-to-date loss of $35.4 million or $0.53 per share for the first nine months of last year. We ended the quarter in an excellent liquidity position, with over $248 million in cash, investments and receivables.

The research and development costs increased from the second quarter, and up slightly year-to-date 2014 compared the year-to-date 2013. We expect these costs to continue to increase into the future, as we have recently initiated phase III development of NBI-98854 in tardive dyskinesia as well as the first clinical trial of our VMAT2 inhibitor in Tourette's syndrome. Additionally, our research team has been advancing other compounds through the development and continuum, and the costs that we will incur in moving these product candidates into development will serve to further increase the R&D expense line.

General and administrative costs increased slightly from the second quarter, mainly driven by market research costs (multiple speakers) related TD and Tourette's syndrome programs. After reviewing the market research and preparation necessary for commercialization of NBI-98854 into tardive dyskinesia we made the decision to move certain activities forward into 2014.

This work was originally scheduled for 2015. Because of this, our general and administrative expenses will be slightly higher than previously anticipated, and should approximate $17.5 million for the full year.

We continue to plan to end 2014 with a strong financial position, with an excess of $230 million in cash and investments at the end of the year. For those looking for additional details on the quarter, we plan to file our 10-Q tomorrow morning. Again, this is a relatively straightforward quarter conducted to plan.

I'd be happy to answer any questions on the financials in the Q&A section of the call. But for now, I'll turn it back over to Kevin.

Thank you, Tim. Once again, hitting all the numbers, there's no surprises there. There shouldn't be any surprises to anyone there. As Tim explained, we are in the process, as you would expect, for gearing up going into late stage trials with 98854.

Chris, could you give us an update on the programs, please?

Absolutely. I'll talk about both the elagolix and VMAT2 programs. The elagolix program, as everyone is well aware, is in the good hands of AbbVie. And we are anticipating completion of the placebo controlled portion of the first pivotal trial later this month.

The last subject will finish their month six visit prior to the roll over into the extension phase. AbbVie will then be in the process of the cleaning QAQC process of that data in the month of December, and we anticipate a look at top line results for the Violet Petal Study in the early part of January.

As you know, the second phase III study, which is a more global study in improvement sites, is ongoing and an update on that trial will come later in 2015. They are also continuing with the phase II B uterine fibroids trial, and we anticipate an update from AbbVie in 2015 as well. So obviously the big news there is that these very large trials are moving ahead as planned, and we look forward to top line results in the very near future.

Close to home and obviously what we're spending our time working on is the VMAT2 program. Both for tardive dyskinesia and for Tourette's syndrome. As Kevin mentioned, we've made very good progress in that regard.

We had a very successful investigative meeting a few weeks ago for the Tourette's syndrome phase I B trial. This is our first foray with 98854 into the adolescent and pediatric population, the target population for [icks] and Tourette's syndrome.

We had a terrific meeting with approximately 10 investigators and their teams reviewing the protocol, and getting ready to start the screening process. It has actually begun, and we've had actually initial dosing in that trial. So I'm very pleased at the start of this program, as I say the first time this molecule has been in a pediatric population.

The investigator meeting for the Kinect3 study occurred just about two weeks after the Tourette's syndrome study. And at this trial, we had more than 200 personnel from the Kinect3 trial, including 70 investigator sites and their teams and the Neurocrine members.

We had a very productive meeting, and I have to say, I've participated in a lot of investigative meetings over the years. This was a very, very engaged, very enthusiastic group of investigators.

They understand the importance of doing clinical research in tardive dyskinesia, and they also are very happy to be part of such a well designed trial and such an important study for patients with these movement disorders. So that investigator meeting went well.

The screening process has begun, and we are already well on our way to seeing TD patients go through the screening mechanisms that we have ensuring that we have very appropriate patients for this trial. Our goal is to have all 70 sites up and running and screening patients by end of year, and we're well on our way to meeting that goal. The expectation is that the recruitment process will take us into mid year next year.

Obviously, I don't have numbers I can give you today. We'll want to get a handle on how recruitment is going into early part of next Spring before we can have a little more confidence around the time lines in that regard. But if this start is any indication, we're very pleased with our progress.

Perhaps even more exciting for us than initiating the Kinect3 study and initiating the T-Force study in Tourette's is the hard work that was done resulting in the designation of break through therapy. As Kevin mentioned, we're very excited to receive this notification from the FDA, I guess it was just last week, that's right. We had applied for this a few months ago.

The break through therapy typically has been designated for compounds in hematology and oncology. There have been a few other areas with not much in the neurology and psychiatry space. And so we were very pleased that the FDA not only acknowledged the importance of tardive dyskinesia as a serious unmet medical need. But the importance of break through designation is that gives us a greater access to senior members of the FDA team.

It involves people from the office of new drugs, not just the review division. And we have a series of interactions, all designed with one express purpose. That is to help this development program move as quickly as possible to NDA, and ideally to approval.

So this allows us to have more frequent communication, better quality communication. Ways of trying to remove road blocks and obstacles, and prevent surprises that would interfere with this NDA getting approved.

We're already in the process of working with the team members at the FDA who will participate in this series of interactions and conversations. And we'd like to really take off the table any potential hiccups before we get to the NDA, and increase the probability of a successful review and approval.

So we're very excited about this. Obviously break through therapy designation is a relatively new pathway. The FDA has had this for a little over two years, I believe, and this is something that again reinforces the fact that the FDA is serious about tardive dyskinesia, and serious about helping with this development program.

Our next interaction with the FDA around the break through designation will be a type B meeting in 2015. And I'll give you some more color on that when we have more details.

So very exciting. People are extremely busy. We have a very enthusiastic group of investigators for both Tourette's and tardive dyskinesia, and I'll keep you updated as the recruitment process goes along.

Kevin, I think I'll turn it back to you.

Thanks, Chris. So why don't we go straight into questions now, so that we can answer anything, any questions that you may have.

(Operator Instructions)

We'll take our first question from Robyn Karnauskas from Deutsche Bank. Please go ahead.

Hello, this is for Mohit for Robyn. Thanks for taking my question, and congratulations to the progress.

So my question is regarding the newly acquired breakthrough designation. Do you expect any changes in terms of timing of the filing, and amount of data you might need for the submission because of the breakthrough designation? And then I have a follow-up as well. Thanks.

Mohit, thank you for that. So as you know, we have planned or anticipated NDA filing in late 2016. I don't see that changing radically.

As I say, I think the main benefit for us at this stage since we're already in Phase III is that any of the other things that become potential hurdles or road blocks at the time of NDA, we can deal with, address, manage in advance of the NDA filing. There are some potential benefits that we might take advantage of that could help from a timing point of view, but until I have that type B meeting I really won't be able to get any further clarity.

We already had fast track designation, and so -- and we've already had a very successful end of Phase II meeting. We already have achieved success in that we have one pivotal phase III trial and the Kinect2 is potentially stands as an adequate and well controlled trial, i.e. a pivotal trial. We already have -- fast track already gives us the opportunity to have rolling submission of NDA.

So things are moving quickly. Whether I can move it even a little faster and whether at the time of we get closer to NDA, whether FDA themselves are interested in a priority review, that remains to be seen. Obviously, we'd like to do all those things as we can but right now it's still 2016 NDA.

Great. That's helpful. And then one more follow up if I may.

Regarding the Tourette's study, we understand that there is no placebo arm. Could you please help us understand how you would be looking at the data once they are available in 2015? And what would help you make a good noble decision at this stage? Thanks.

Thank you. So a couple of interesting points around this. This phase I B study is a safety tolerability and PK study, and it's designed in such a way that we dosed in adolescents first in very conservative doses. If that's safe and well tolerated, then we dose in the younger pediatric children. And then we move up to the next dose in the adolescents, and then the next dose in the younger children. And we work our way through.

It is designed not as an efficacy study. There is no placebo. We are using pharmacodynamic assessments, i.e. tic rating scales, and I wouldn't be surprised that as we move up in dose if we see some impact on the tic rating scale, but we are not using this study as a go, no go study for efficacy.

We know, mechanistically, that VMAT2 inhibition is successful in reducing tics. So this study is not designed to answer that question. The next trial will be a trial where we go into the study with doses that we know are in the right range to suppress tics, and it's a longer duration trial that will be designed to address the efficacy study.

But in this early study, you won't see us making a go no go decision based on efficacy. It will be purely on safety and PK used for dosing selection in subsequent trials.

Thanks. And congratulations on the [results] again.

Thank you.

We'll take our next question from Charles Duncan of Piper Jaffray. Please go ahead.

Hello, guys. Thanks for taking the question, and let me add my congratulations on the breakthrough therapy designation.

Thanks.

Had a quick question regarding, I guess, tardive dyskinesia, versus Tourette's, versus Huntington's. And clearly, the breakthrough therapy designation points to unmet need in tardive dyskinesia. But what do you think about the clinical value in tardive versus and perhaps the pricing paradigms that could exist versus Huntington's or Tourette's more orphan disease type indications?

Let me address a couple of those points. You are in correct in that chorea associated with Huntington's disease is an orphan disease. You are not correct that neither tardive dyskinesia nor Tourette's are orphan. That while years ago both were considered orphan conditions, they no longer are.

The epidemiology of tardive and the epidemiology of Tourette's are that they are considerably more prevalent. So they're at least 500,000 if not closer to 800,000 people with tardive dyskinesia in the US, and Tourette's it's in that 400,000 to 600,000 range depending on the literature and how you want to talk about the epidemiology. So neither of those are tardive.

From a clinical meaningfulness point of view, we know that reduction in tardive dyskinesia and reduction in tic intensity, frequency, severity, et cetera, is very impactful on patient lives. And I can say this now as a movement disorder neurologist, I can tell you that treating Huntington's patients, treating TD patients, treating tic patients, the magnitude of improvement and the magnitude of impact on patient lives is very similar.

And in some ways you have to say that for a lifelong condition like tardive dyskinesia, or in a adolescent condition with for example severe tics interfering with school, education, socialization of children. In some ways, TD and TS are more impactful than reduction of chorea in Huntington's patients. We think that the fact it got breakthrough therapy designation I think reflects the importance that not only we put on this, but the FDA does as well.

And, Charles, from the standpoint of pricing that you had brought up there. Certainly one sees that in orphan conditions such as Huntington's chorea, drugs cost more in that disease state than what we would be charging for the other much larger indications. But as we've said before, we haven't done any formal pricing research yet, so there's not a whole lot that we can say about pricing at this point.

That makes sense, Kevin. I figured that was the case. But let me ask you one question, Chris, one additional question.

Chris did mention, I don't think he used the word quality of patients. But you did allude to that for the tardive study being important for success, or certainly gave K2 an advantage over K1. I guess what are you mostly concerned about in terms of enrollment? Is it adherence to the enrollment criteria, or is it keeping the right kind of sites involved, or what is it for tardive?

Before Chris answers that in some detail, I would just like to say that for Kinect1 and Kinect2, we got exactly the patient population that we wanted to get. I think our learnings on enrollment were done in the two previous phase II A studies, and again points why we spend time in phase II so that we know that we've got things nailed down in phase III. But, Chris, do you want to -- ?

I'll just emphasize -- Kevin very nicely answered that. The patients that were recruited for Kinect were virtually identical to the patients we recruited to Kinect2. The difference was the blinded central raters in Kinect2, versus the sight raters in Kinect.

In fact as I've said before, when we had the blinded central raters go back and score the blinded randomized videos from Kinect, we showed that 854 worked very nicely in Kinect, and even at the low dose of 50 milligrams. And so again, the patient quality was good in those two trials, and we will do the exact same thing in Kinect3 and our open label one year safety trial.

We use a screening process that assures that these subjects have moderate or severe tardive dyskinesia. We find that that is necessary because there are other confounding things, other drug induced movement disorders that sometimes get misdiagnosed as tardive dyskinesia, and you don't want those subjects in these trials.

Perfect. Thanks for the added color, guys.

We'll take our next question from Ian Somaiya of Nomura Securities. Please go ahead.

Just a quick question on the VMAT program, and then maybe switch over to elagolix. How should we think about the sales force and the marketing effort for TD versus Tourette's, or any other indications you might choose to pursue? And how much overlap is there?

Ian, thanks for the question. We would envision that the sales force that we would be putting in place initially for TD is going to be hitting neurologist movement disorder specialists and those centers, and high influencing high prescribing psychiatrists. And then broadening that sales force out over to going more for the community psychiatrist.

The treating physician is very similar for TD from the psychiatrist's standpoint. But we haven't -- we've done beginnings works on sizing the sales force into TD, which is approximately 150 field force reps. But we haven't begun that process in looking at the degree of overlap for Tourette's at this point.

Okay. And just on elagolix, we all understand that your partner is running the program here. Can you share with us your thoughts on what you would consider to be good data, and what ultimately the goal was for your partner evaluating a higher dose in the phase III trial.

I think -- taking the second question first. I'm not sure that any major pharma would take just one dose into a phase III program, especially one as large as this. And so we had studied exhaustively 150 milligrams, and so clearly, that's one of the doses. We had also studied other higher doses, and so AbbVie had chosen to take yet a second dose forward. And I think that's just being a good steward with the program and the drug. In order to obviously be able to get as many bites of the apple as possible for efficacy, and even safety with this.

What do we see as success? I think as we've said many times, that the studies are way over powered for efficacy based on what we saw in our last phase II study that we did with the drug in the Daisy Petal Study. So what AbbVie will be disclosing, we anticipate, is going to be P values, both for the primary end point at month three, and then for key secondary end point at the end of the placebo controlled trial at month six. And that these each have to hit a 0.025, and so we see that success is going to be hitting those P values in this, and having a well tolerated drug at the same time.

Ian, this is Tim. You're aware that there's a second phase III going on, the solstice study. And for multiple reasons, AbbVie, and rightfully so, is going to be limited on disclosure until that second study completes out. So it would be sharing the results, as Kevin mentioned, on a group basis. They wouldn't have unblinded at the patient level basis yet. And again, the coprimary end points would be shared.

And as far as safety, we've been getting a lot of questions around what the safety disclosure is going to look like. Are we going to see a table like you'd normally see from a Neurocrine type release? And you're not going to see that. There will be a general overall comment around the safety and the conduct of the study. And then obviously a lot more details [will be] released at future scientific meetings. And then after the entire phase III program is completed.

And then the other question is around bone. And that data for bone, because people are asking about what are we going to know about six month bone data? And what we can tell you is we've already shared the six month bone data with the Street as a result of the 603 study. And that showed six month bone data, we had minimal impact on bone at 150 milligrams out of six months. The one year bone data won't be shared until both studies are complete, because they will take both patient populations, pool them, and then share that analysis at that point.

I guess the question is, if they were to extrapolate the higher dose and what impact it might have on bone?

(inaudible) run the trial.

Yes, that will be in the data.

Okay. Thank you so much.

Thank you, Ian.

(Operator Instructions)

We'll take our next question from Phil Nadeau of Cowen & Company. Please go ahead.

Good afternoon. Thanks for taking my questions.

First, just a follow up to Ian's question on what's going to be disclosed with the top line results. I guess first, will the magnitude of the end points be disclosed or will it simply be the P values?

No. It will be simply the P values. We've been speaking with AbbVie. Tim has been actually leading that and speaking with AbbVie for quite some time now.

And really, it goes to what Tim said. They want to be able to disclose enough to give people a good sense of how the trial turned out, and we obviously hope positive. But at the same time, they're weighing that against they have an ongoing trial that they do not want to bias.

Okay. So if I understood your response to Ian's question, we'll basically get three things, the P value on a three month end point, P value on a six month end point, and then a qualitative description of the safety. Is that right? Or is there anything else that you expect to come out with the top line results?

There may be more color around it, but that's basically what we're expecting at this point.

Okay. And then on the efficacy, it sounds like the three month data and the six month data are actually co-primary end points?

No, no.

No. Okay.

So, Phil, the co-primary end points are dysmenorrhea and non-menstrual pelvic pain.

Okay.

And each one of them have to hit at a point -- at month three at a 0.025.

I see. Okay.

And then at month six, which is still placebo controlled, out to six months, that's a secondary end point to show that you have the maintenance of that response.

I see. So when you said both have to be hit, I thought you meant three and six months. But it's actually both end points at three months.

I misspoke. It's that at month three, both of the end points have to hit at month three.

Okay, great. That clarifies things, that's how I thought it was which is why I was confused. That's very helpful.

Then second on the uterine fibroid data that AbbVie is going to hopefully release in the second half of next year. I know, Tim, you had said you were also in discussions with AbbVie about the quality and quantity of data that would be released from the phase II B. Have those discussions completed, or do you still continue to negotiate?

We're still working through those right now. Phil, as you know, AbbVie's got a lot of stuff on their plate right now.

They've got a couple big events coming between now and the end of the year, one of them being our elagolix data. And so what we've decided do is just table that discussion until early next year, and then we just start talking about that.

Okay.

We should be able to give you an update by your conference.

Okay. Great. Then one just on the VMAT Tourette's program. What risks should we be considering as you move the VMAT into adolescents and pediatric patients? Are there new side effects that we should be concerned about, and I guess maybe specifically has tetrabenazine been used in the pediatric population, and what showed up in those trials?

So the kinds of risks that one expects from VMAT2 in addition in adults are very similar to what you'd expect in kids. If you go up on the dose you get sedation, trouble concentrating, akathisia that is motor restlessness. So those would be the main things that one would see at doses in the upper range of clinically relevant doses.

In my experience, as a neurologist treating children with Tourette's using off-label tetrabenazine, you don't see anything unusual. Although, it's very difficult to make a truly accurate statement because careful well controlled placebo controlled trials of tetrabenazene in Tourette's have not been done. And so you're only looking at open label experience and anecdotal case reports and that sort of thing.

But I don't think there's a unique set of risks in the pediatric population. I think the risks are very similar to adults. We're starting at very conservative low doses in our trial, and the foundation of our entire 854 program is about having a very safe and well tolerated drug.

Okay. And while we're talking about risks, you had mentioned potential hiccups that you want to get out of the way through your discussions with the FDA with the breakthrough designation. What could some of those hiccups be?

My impression from your comments are that you're very happy with the trial design that came from a productive meeting with FDA, so it's nothing do with the trial. What are some of the hiccups that you referred to?

There's a whole list of the generic kinds of hiccups that one sometimes is surprised with as you have an NDA file. There are CMC, manufacturing issues that there may be a new member of the review team who has a particular concern about a certain manufacturing method, or how data is documented during the certification and release process. It may be in the pre clinical arena.

There may be a way of interpreting how the histopathology is analyzed. And did the pathologists who were studying the rodent and the dog and histopath, did they use the right stains to show neurite formation in brains? It's those kinds of things. You just want to make sure you've talked through all of those things in advance.

In addition, there on the clinical end, there are things that I want to have a chance to tee up before we get there. And there are things like we have a patient reported outcome tool that we're developing that's unique for tardive dyskinesia.

I would love to be able to have some more in depth conversations with the FDA before the NDA, because this is a tool that I think is going to generate useful data from our Kinect3 study. And I'd love to be able to talk about that in the post approval world as even potentially a claim.

And so we want to be able to tee up, have that conversation. I'd like to know in advance if there's specific topics that members of the review team have a personal position on. So as you know, in this day and age, every NCE, especially if it's for a indication that has never had an approval before, goes through a advisory committee.

I'd like to know what are those hot button topics that might be there at the review team level that could come up at the advisory committee. Well I'd like to be able to plan for that, and be able to address those well in advance rather than having a surprise. It's those kinds of things.

That makes a lot of sense. Just one final question, back to the first one I asked just to make sure I'm clear. So when we see top line data, we're going to get actually four P values, the two P values for the three month data, the two P values for the six month data, and then some qualitative statement on safety. Is that correct?

Yes, that is correct.

Okay. Perfect. Thanks for taking my questions.

Thank you Phil.

At this time, we have no further questions in queue. So I'll turn the program back over to Mr. Gorman.

Thank you very much. Chris has spoken quite a bit, and you guys have rightfully been interested in the breakthrough designation that we've received. And really what it does is the breakthrough designation along with many other initiatives that the agency has taken on over the last several years has been, as Janet Woodcock has said, to increase communication. So that there's more transparency between the division and the sponsor, and really that's what we see as the main power of getting that breakthrough designation.

The bottom line is that with increased communication, we're going to minimize the opportunity for surprises after our NDA submission. And basically getting this truly does derisk the program quite a bit from that standpoint, and there's where the main value of getting this breakthrough designation stems from. We look forward to talking to you in the coming weeks and months about more of this as we have more communication with the FDA through this process.

So I'd like to close with a couple of things. Number one, I know we're getting late in 2014, but I remain still very hopeful that we are going to be able to put another new program into the clinic here at Neurocrine. And in addition, 2015 is going to be a year where all of the efforts from 2014 start coming to fruition.

It's going to be very data rich starting early in January with AbbVie's announcement of the first phase III in endometriosis. And then in the second half of the year, we're going to get both phase II B in uterine fibroids, and also in that second half of the year you can anticipate getting the top line phase III data from our TD trial. In addition, the AbbVie we believe is on track to actually complete the second phase III by year end of next year in endometriosis.

And we will have the data from the phase I B in Tourette's. As Chris had said, we're taking efficacy measures there. The true power though of that study is going to tell us if our drug is safe, and well tolerated, and predictable pharmacokinetics in order to take it into the larger phase II trials and then beyond at that point in time.

So we're going to be speaking this Thursday at the Nomura conference in Boston, so I'd look forward to being able to answer any more questions there. Thank you very much for your attention.

This concludes your teleconference for today. Thank you for your participation. You may disconnect at any time.