Neurocrine Biosciences Inc (NBIX) 2014 Q4 法說會逐字稿

Good day, everyone, and welcome to today's program.

(Operator Instructions)

Please note this call may be recorded.

(Operator Instructions)

It is now my pleasure to turn the conference over to President and CEO, Kevin Gorman. You may begin

Thank you very much and thank you for everyone joining us here on our Q4 earnings call. I'm joined here as usual with Tim Coughlin, our CFO; and Chris O'Brien, our Chief Medical Officer; Jane Sorensen, our Head of IR, here. And before we get started Jane, could you please read our Safe Harbor Statement.

Yes, good afternoon. I want to remind you of Neurocrine's Safe Harbor cautions. Certain statements made in the course of this conference call that state the Company's or Management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements, which are subject to risks and uncertainties.

Information concerning factors that could cause actual results to differ materially from those contained in or implied by the forward-looking statements is contained in the Company's SEC filings including, but not limited to, the Company's annual report on Form 10-K. Copies of this filing may be obtained by visiting the investor relations page on the Company's website at www.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. Before we get started, just a couple of words. I'm looking forward to a year that's really unprecedented in Neurocrine's history with the amount of data that we're going to be coming out with. Seven different clinical trials we'll be reading out this year. Eight, if you count the trial that AbbVie reported out at the beginning of the year.

We did a lot of work last year, particularly in Q4, getting ready for such a data rich year this year. So with that, I'm going to turn it over to Tim where he can go through the financials, then after that Chris will go through our clinical programs. Tim?

Okay, thank you, Kevin, and good afternoon, everyone. As Kevin mentioned, the past quarter has been very busy for the Company with the initiation of the Kinect 3 study and tardive dyskinesia and the public launch of our CRF1 antagonist and congenital adrenal hyperplasia. This increase in activity was evidenced in our operating expenses with a 25% increase in R&D expense from the prior quarter.

Our financial guidance shared with the investors and with the investment community at the beginning of the year was to end the year with over $230 million in cash, investments and receivables, coupled with a net loss of less than $61 million. We met both of these items ending 2014 with approximately $232 million in the bank and net loss of $60.5 million, or $0.81 per share. Our net operating cash burn for 2014 was approximately $47 million.

Our GAAP net loss for 2014 is $60.5 million compared to the previous year's net loss of $46.1 million. Our net loss for the quarter was $19.4 million, or $0.26 per share. This compared to a net loss of $10.6 million, or $0.16 per share in the fourth quarter of 2013. The increase in net loss for both the quarter and the year ended December 31, 2014, resulted from increased clinical development activity, primarily related to our NBI-98854, our VMAT2 inhibitor for tardive dyskinesia and Tourette's syndrome, as well as our CRF program in the early stage pre-IND work.

Additionally our personnel-related expenses increased in 2014. We began 2014 with 81 full-time employees and ended the year with 94 full-time employees. Almost all those additions were in research and development. Non-cash share-based compensation expense for 2014 was approximately $10.4 million.

For 2015, our financial guidance is that we expect to have a gross cash burn of approximately $80 million to $85 million. This burn estimate is prior to any consideration of revenue, for example milestones under our AbbVie agreement. The next milestone anticipated under the AbbVie agreement would be moving elagolix into Phase III development for uterine fibroids.

From an income statement perspective we expect our operating expenses to increase to approximately $106 million to $111 million in 2015. This $40 million increase in expenses is due to three major factors. First, external development expense related to the Phase III clinical program for tardive dyskinesia is expected to increase this year by approximately $17 million to $20 million.

Second, our CRF program for congenital adrenal hyperplasia will expand the two clinical styles this year, pre clinical work as well as CMC work. The fully loaded costs of this program, as well as some other earlier programs, will increase R&D by approximately $10 million over the 2014 levels.

Finally, share-based compensation cost will increase by approximately $15 million this year. The increase in share-based compensation expense is primarily driven by higher Black-Scholes valuations due to a higher strike price. Additionally, a portion of this increase is due to the potential vesting of certain performance restricted stock units which totaled $6 million. We have included this number in the guidance.

The increase in Black-Scholes value related to options, as well as the grant dates fair value of restricted stock units, is partially offset by a lower number of options and restricted stock units that we plan to grant in 2015 versus 2014. The $25 million in anticipated share-based compensation expense is also the major difference between our expected gross cash burn, again prior to any revenue, and our projected GAAP expenses.

So that concludes my prepared remarks on the financials. To conclude, our 10K has been filed with the SEC today. I would be glad to entertain any questions during the Q&A session.

Thanks, Tim. So Chris has quite a bit that we can go over, but my guess is he's going to save a lot of it for the Q&A session that he normally does. But we have a number of programs here obviously there's elagolix, there's our VMAT2 program; and also as we've mentioned, we anticipate in Q2 of this year that we're going to be filing a IND and a new program, completely new compound and indication. Not much more to say about that, other than that. But, Chris.

Thank you, Kevin, and good afternoon. Thanks for participating in the call this afternoon. I'll start with elagolix since that was the most recent news from AbbVie. And I think everybody on the call is very aware of the details of that very nice efficacy and safety readout from the first of two Phase III pivotal trials in endometriosis. And the second Phase III pivotal trial is currently underway, and as Kevin mentioned, we anticipate from that the readout on the top line results of that at end of year.

AbbVie is doing a fantastic job conducting these massive studies, these are the largest endometriosis trials that have ever been conducted. And as we've seen, with the limited data that's available, the efficacy has been excellent across primary and secondary endpoints as well as a very nice safety profile.

Obviously, women are continuing in the open label extension phase of both the Violet Petal Study, the first of Phase III, as well as the SOLSTICE study which is the second Phase III. And that one is more of the mixed US and international trial. Excellent work there on AbbVie's part, and I suspect we'll have some questions during the Q&A, so I will hold off on more detail there.

The fibroids program is also going well, as the listeners are well aware of the Phase IIB study, that's currently underway is scheduled for completion of the second cohort and data readout later this year. That Phase IIB study will be the basis of kicking off an end of Phase II discussion with the FDA and presumably shortly thereafter, if the results are indeed favorable, the start of the Phase III trial.

Let me focus on the work that we're doing internally since the team is very busy with the VMAT and CAH programs, as well as the new molecule for a new indication, as we were preparing the documentation to file a new IND in Q2. So let's start with the VMAT2 program. The main activity as Tim mentioned with the finances is the work on the Kinect 3 style -- trial. Kinect 3 is the last placebo controlled registration trial that we are performing for this TD registration effort.

The trial is going very well. We have sites open in North America, that's Canada, US and Puerto Rico. The sites are recruiting very high-quality subjects. We've been very pleased with the process that we have in place for screening these subjects and the quality of the patients and the quality of the videos that form the basis of the blinded central raters assessment of the dyskinesia. So this is moving well.

We're tracking at exactly at timeline. We've talked about having the last patient randomized this summer and results from the Phase III trial in the fall. So that's going very well, we're pleased with the efforts from our investigators and the quality of what we've seen. And so far to date obviously it's unblinded but we're not seeing any kind the safety signal or concerns from the patients that have been randomized. And we now have quite a few patients that have moved through 12 weeks of treatment.

The second piece of the TD Phase III program is the open-label long-term safety studies, so called Kinect 4. And that study has been approved by the IRBs and we're getting ready to launch that trial in March. And so far we're very much on track with that program as well.

The next VMAT2 set of activities is in our Tourette's syndrome program, and I think as we've discussed before on these calls and in our presentations, we have a clinical trial underway right now with both adolescents and young children with Tourette's syndrome participating in a Phase IB trial. That is they're treated for two weeks of continuous treatment, and we're starting with low doses and working our way to higher doses in this Phase IB study.

The goal is to assess safety and tolerability of NBI-98854 in children with tic disorder, or Tourette's syndrome. And we're also looking at some efficacy markers although the study is neither designed nor powered to give us an efficacy report. We certainly will have data, pharmacodynamic data, to look at the end of the trial wherein we have the gold standard for tick studies. The Yale Global Tic Severity scale, as assessed by the investigators, who will also have video assessment of tic severity using the Rush video protocol and a number of other clinically relevant scales for this population.

And we'll also have intensive pharmacokinetic data. We have, obviously, a lot of experience with PK data in adults with our compound and we have a model of exposure that we designed to give us information about what children should be exposed to with a given dose. Part of the effort in this Phase IB trial is to help us confirm that in fact what they actually are exposed to is what our model predicts, and this will help us very much select the doses that we need for registration trials in Tourette's Syndrome.

So that's going well. We are on track with that is expected. Our plan is to have results from the so-called T-Force trial in the fall. And if any of you haven't had a chance yet to look, you can find out information about T-Force from the T-Force website and also on www.clinicaltrials.gov. As well as, the same thing is true for the Kinect 3 study, there is a Kinect 3 website with additional information. So that's the VMAT2 program. I suspect we'll have some time for Q&A on VMAT in a few minutes.

Now moving on to the congenital adrenal hyperplasia program, CAH. As mentioned in our presentations and in Tim's comments, we started a public presentation about this program in December of this past year and that was with data from so-called, 1301 study. This was a small pilot study in young women with congenital adrenal hyperplasia. A single-dose study designed to give us just very simple answer to a question, if you give me single dose of this drug, do you see some kind of pharmacodynamic effect on the biomarkers of interest.

The study was not designed as an efficacy trial. It has, obviously, no information about chronic repeated dose exposure and it certainly doesn't tell you about what happens in children with CAH which ultimately are the target population. But we were very pleased with what we saw, and also very pleased that the FDA told us they believe that these biomarkers are indeed the appropriate endpoints for this stage of clinical development. So that information allowed us to talk about the program publicly and invest money into the next trials.

So we have two, as Tim mentioned. We have -- the first study is a single-dose trial in adolescence with CAH and that study has been approved by the IRB. The sites are up and ready and they've started the screening process for this study. We'll have top line results from this single-dose adolescent study in the fall.

Immediately on the heels of this, we will start of the repeated dose study in young adults with CAH. This is a two-week dosing trial looking at a range of doses to help us determine what doses we want to take into the pivotal registration trials and the data that we will use when we meet with the FDA about what Phase III looks like. And so this study is getting up and running and we're starting dosing in Q2. We'll have results from that study in the fall.

I should mention that the primary investigator from the pilot study that was already completed, Dr. Auchus will be presenting that data at a special symposium that's part of the upcoming Endocrine Society Meetings to be held here in San Diego on March 5, at 11:30 AM. The program is about, basically, bench to bedside; looking at Hypothalamic-Pituitary-Adrenal therapies. And so, Dr. Auchus will be presenting the data from the 1301 study.

Very exciting times for us in this program, and we are in the process of meeting with endocrinologists and pediatric endocrinologists both here in the US and in Europe as we envision the expanded clinical program for CAH going forward.

So we've talked about elagolix, we've talked about a new IND with a new molecule for a new indication to be filed in Q2, talked about the tardive dyskinesia program with Kinect 3 and Kinect 4; we've talked about the T-Force study with Tourette's Syndrome; and congenital adrenal hyperplasia studies, the pilot study, the single-dose adolescent study; and the repeated dose young adult study. Obviously, a lot of activity. Very pleased with the progress and looking forward to a wealth of [our] data reading out later this year.

So I'll stop there and turn it back Kevin and look forward to your questions.

Thank you, Chris. Actually, why don't we open it up for Q&A right now.

(Operator Instructions)

Robyn Karnauskas, Deutsche Bank.

First question. You filed your 10-K; and in it, I'm picking out some IRA subsidiaries. Wondering if you could comment on potential long-term tax rate of the Company. If you can't give guidance, maybe help us think about is it possible to get a better tax rate on elagolix. Or is this something that might be relevant for your newer products?

And then the second question. I get this question a lot with Auspex data coming middle of the year. Can you outline, Chris, for us what QT evaluations you've done in your clinical trials for tardive dyskinesia? And what gives you the comfort that there won't be a signal? Thanks.

Hello, Robyn. It's Tim.

Related to the IRA subsidiaries, we set them up right at the end of December to take advantage of the grandfathering clause that's out there as far as domicile. And that is reasonably set up this year. As far as the potential tax advantage, we're still working through all that at this present time. And it is for our international strategy, obviously, and to work our way through that over the next couple of months. And we'll update the street once we get to that point. But right now, we're still going through the different evaluations that have to happen prior to -- for example, moving any intellectual property into those subsidiaries.

Robyn, to your question about QTc prolongation. We've conducted a number of Phase I studies; and obviously, our Phase II and now our Phase III work is ongoing. We haven't seen any signals from arrhythmia or arrhythmia risk or QTc prolongation to date. We will be discussing with the FDA what is it that they want to see for our MBA in light of more formal QTc analyses. But we have a package of material currently available for the FDA.

I don't think we'll have further detail to give you that until we finish some of our discussions with the FDA. The good news is that as part of our breakthrough therapy designation, we have excellent communication with the Agency. And we'll be able to get these questions addressed the near term.

I should also add that one of the things that we do as part of this program is try to address -- the quick question that's most clinically important is can you give a drug like 854 to patients who are already receiving a combination of medications that have known potential to prolong QTc drugs such as the antipsychotics for example in some of the SSRIs. All of those have -- and AEDs -- some of them have this potential to prolong QTc.

So we've done a very careful job of documenting all of this concomitant medication use in conjunction with a wide range of doses of our study compound 854, and we've analyzed that data. To date, we have seen no evidence for any interaction or prolongation of QTc in most subjects. And that will be a very important part of our NDA because psychiatrists and neurologists who would prescribe 854 want to know that they can use this drug safely in conjunction with the underlying psychiatric medication. So that will be an important part of the package.

That's really helpful. And if I can have a follow up, if possible.

The uterine fibroid data is coming out. And in the past, with elagolix and endo, there was a series of Phase IIs; and you had to work through them. I'm just trying to figure out -- there's not a lot, in my opinion, for uterine fibroid in stock. What is the biggest risk with this Phase II now that you know so much from the Phase III trial and you predicted exactly how it would read out? What is the biggest risk to the Phase II not being positive? Or on the safety side, what are the things you're worried about? Thanks.

That's a very good question because this is an interesting situation with elagolix because we know elagolix reduces menstrual bleeding, uterine bleeding. We know that's true in endometriosis, as we've seen with our data that we developed in our trials.

But we've also seen that AbbVie ran a Phase IIA study in which they saw proof of concept, which allowed them to start the Phase IIB study. Now although they didn't release data, they said we found proof of concept and we moved into Phase IIB. So the endpoint, and the only endpoint for uterine fibroids for the FDA, is uterine bleeding or menstrual bleeding. And a reduction in uterine bleeding was the basis from them moving from Phase IIA to Phase IIB.

The people at AbbVie, formerly Abbott and TAP, were the ones that helped work with the FDA over a period of many years to design and reach consensus with the FDA on what that primary endpoint is. In this case, there's an objective and there's also a subjective way of measuring uterine bleeding; and AbbVie has data for both of those things.

So I don't think there's an efficacy risk here. And particularly you can get a sense of that if you look at www.clinicaltrials.gov and you see what the Phase IIB study looks like. And you'll see that they're studying doses in the cohorts of elagolix that are -- they're looking at a dose that they haven't specified.

But one can assume that it's higher than what we've studied in endometriosis because they're using a low-dose oral contraceptive as so-called add-back. And the only reason you do that is if you suppress estrogen or estradiol so much that you begin to have impact on bone mineral density. So if you use a low dose of an oral contraceptive and an approved add-back, you can mitigate that risk of impact on BMD.

So what you see when you look at www.clinicaltrials.gov is they're not really looking at elagolix. They know elagolix works. They're looking at which dose of add-back is the best to take forward into Phase III.

And so I think we don't have a major efficacy risk here on uterine bleeding. And the issue is, do they have a dose they're comfortable with in conjunction with a dose of add-back that gives them the kind of safety profile they need going forward? And the literature is replete with examples of low dose add-back taking care of BMD risk even with profound suppression drugs like Lupron.

And, Robyn, they're fortunate in that you do have a very good biomarker here for bone risk, and that is the estradiol. And they've modeled that extensively, and AbbVie does an amazing job of modeling. In addition, that's why this study is six months in duration, whereas the Phase IIA was three months in duration, because you want to be able to have that six-month delta between your baseline DEXA scan and then a DEXA scan that would be meaningful.

So to reiterate what Chris said, really this trial isn't so much about elagolix. This trial is just about perfecting the level of estradiol to get back to the patient so that you can have a long-term treatment.

Great, thanks so much. Thanks for taking so many questions.

Brian Skorney, Robert W. Baird.

Starting on 854, there's been a lot of discussions about placing those VMAT2s considering you're going after TD at the first indication, Auspex potentially targeting a different one. Can you maybe walk through, very high level, your thoughts on how we should be thinking about the pricing on 854?

And a follow up on elagolix in uterine fibroids. I wonder if you'd just maybe set expectations in terms of what exactly we should be looking for in terms of a clinically meaningful endpoint in terms of uterine bleeding? And would you anticipate that we might also see significant reductions in fibroid size, based on some of the historical data with GnRH agonists?

Let me take that second one first, Brian; and then I'll let Kevin address the first one.

With uterine fibroids, a normal woman has around 40 milliliters of uterine bleeding per month. High uterine bleeding is set at a threshold. By definition, heavy uterine bleeding is anything over 80 milliliters a month. These women who are in the uterine fibroid trials have a lot of bleeding, in the 200 to 300 milliliter or more per month. So they come in with a very high baseline.

And the bottom line is with effective hormonal therapy -- like elagolix, Lupron, other drugs -- you can shut down uterine bleeding to very, very, very low levels. So what you'll see is -- you'll see either -- I don't know how AbbVie is going to tell us the results. But you'll see that there is a measurement of the amount of uterine bleeding, and the percent of responders, women who get to either no bleeding or below normal or back into the normal range. You may see it several different ways.

We haven't had the discussions yet with AbbVie about the detail that they will share come topline results, but that Tim's job to negotiate the press releases. You will see the data reported using the objective measurement. This is the so-called alkaline-hematin-method of quantifying uterine blood loss, which is very objective and meets the FDA requirements.

Brian, as to your first question, it is premature to be talking about pricing at this stage. We're just in the middle of the Phase III program. We've done some very qualitative preliminary pricing research, and we'll be embarking on the quantitative research. But as you pose it between ourselves and Auspex, Auspex is initially going out into an indication that is very much an orphan indication, with just less than 4,000 patients in the Huntington's chorea population that have chorea that would necessitate an intervention like Auspex's drug.

We're going into, as our initial indication, tardive dyskinesia, which as you know is at least 500,000 patients. So those are two very different populations. And just as you said, on a very high level they would have two different levels of pricing associated with them. But until we're much closer to commercialization, I think that's probably all I can really say about pricing.

Fair enough. Thanks.

Charles Duncan, Piper Jaffray.

This is Roy for Charles. In line with the last question on 854, do you have any plans to study in Huntington's chorea at this time? Does that depend on the Kinect 3 data? And do you have any thoughts on an approved second-generation HC drug being used off label in TD? Or vice versa, is the other scenario more likely? Thanks.

If I understand the question correctly, Roy, the first question is would we study 854 in Huntington's disease. It's obviously not an urgent unmet medical need. All the efforts that we have currently are focused on TD and TS. Is that something we might do down the road? It's certainly possible, but it's not something that makes a lot of sense from a business point of view and a clinical point of view at the present time.

Now, having said that, we have backup molecules for 854 that have shown some very nice attributes in our pre-clinical models in testing. And these, potentially, we would consider bringing into the clinic for other indications. And as we've mentioned publicly before, would that be schizophrenia, would it be other movement disorders? All that remains to be sorted out, but we certainly potentially could go there.

As to your question about what do I think about next generation Huntington's drugs going into the market for Huntington's, it depends. If they confer an advantage over existing therapies, then I'd say people would like that. Clinicians are always happy to address a deficiency of current therapy.

Sorry, I was asking more about off-label use. If something is approved for Huntington's, do you see it being used in tardive? Or do you see the vice versa? Something is approved for tardive; do you see it being used for Huntington's?

That's a little bit difficult because currently the approved drug, for example for Huntington's disease, is distributed through a specialty pharmacy distribution system and has a REMS program in place that said this drug is to be used to treat chorea associated with Huntington's disease. And it's priced as an orphan drug, and so you don't see a lot of off-label use of an expensive drug for a larger population.

Okay that makes sense.

Do you have any sense of the earliest Kinect 4 can complete and then maybe the earliest the NDA could be filed?

We've said publicly our goal is to file the NDA in 2016, and that's still what we're working on.

Yes, we have to see. It's too early to talk about enrollments in Kinect 4 at this point in time. So once we have enrollment curve, as we said with our Kinect 3 enrollment curve, we'll be getting more precise with those dates.

Okay, and then a couple of quick ones on CAH, if I could. In general, how big do you think the market opportunity could be; and how is that disease currently treated? Thanks.

So it's an orphan disease. There are about 30,000 patients with classic CAH in the country, in the US; and half of those are females. And so it's the women with CAH, particularly the young women, the girls and adolescents with CAH, that's the major unmet medical need. So cut 30,000 in half; that's 15,000. And then you say maybe your addressable population is 10,000 subjects. We think that's the market opportunity there.

(multiple voices) current therapies, there is no current therapy for the excess of androgens other than using very high doses of hydrocortisone. Now the hydrocortisone is used to replace the absent cortisol in these patients, since they don't make cortisol. You can use even higher doses, excessive super physiologic exposures to cortisol, to try to shut down the HPA axis. But that results in an additional pile of unwanted side effects and makes management very difficult. These patients get obesity, diabetes, bone mineral density abnormalities, and other problems. So there are no therapies that do what we're proposing to do.

Very good, thank you.

Ian Somaiya, Nomura.

First was housekeeping. Can you update us on the regulatory timelines for the endometriosis indication for elagolix, US and Europe? And I had a couple of follow ups.

Yes, hello, Ian.

We don't know really much at all about what's going on in Europe with AbbVie and the program. That we've not had any role or visibility into. With the way the program is proceeding right now, where AbbVie is doing a great job, I would see that it would be towards the very end of 2016 potentially for filing. They've still talked about 2017 as being a commercialization target.

Okay, and a question for --

Just to be clear, that would be with endometriosis. Uterine fibroids, we'd have to await to see the start of Phase III and the pace on that.

Okay, and a question for Chris on the Tourette's Phase I trial. You're clearly setting a range of doses in that trial. Just curious, any thoughts on how the dosing and drugs might compare to that in TD?

And from a larger market perspective, maybe a question for Kevin if you want to tackle it. How we should think about what the pricing dynamic could be in Tourette's and TD?

I'll take the pricing dynamic in there. Number one, for us as we look at it, we'd be coming out in TD first. And we'll have a price that's set there that will allow for broad adoption throughout the TD population. We'd then be coming out into the Tourette's population.

Had it been the opposite, I think we probably would have had higher pricing into the Tourette's population, and then see what we could carry over in TD. At least right now, without any data or work in front of me, I would say that the pricing is going to be similar between the two populations that we'll have.

Yes, the doses -- I mentioned our PK model before. And so far, looking at PK data from the Phase I study, things are pretty much in line with that. The doses will range from quite a bit lower, obviously, in small children. A skinny six-year-old is going to require a pretty small dose. Up to a fairly robust 18-year-old is going to require a dose like any other adult. And we believe that the exposure necessary to suppress tics is very similar to the exposure necessary to reduce dyskinesia. So I think you'll see two or three doses available that start below and go up to the TD dose.

The one twist I would add is we likely would consider the availability of a pediatric-friendly formulation for the young kids that don't do well with capsules. But we'll see. That work is ongoing, so we'll see and what the market research tells us is appropriate for this population.

Just one follow up based on your answer. Your breakthrough therapy designation, does it enable you to have initial discussion with the FDA regarding what the next steps should be or could be for Tourette's? Can you move to Phase III trials?

The breakthrough designation was given for this molecule 854 for tardive dyskinesia. It doesn't apply to Tourette's. The Tourette's has a separate IND.

No, no, fully appreciate that. As you're discussing safety for the molecule, does it maybe inform you in any way in terms of what the FDA would be amenable to in terms of the next steps in Tourette's?

Sure. I mean in a loose way, about what are their general safety concerns about this kind of molecule, yes. But at a specific level for Tourette's, we won't have our next discussion with them until we get this Phase IB data in hand.

Okay. Thank you very much.

Phil Nadeau, Cowen and Company.

Chris, first one to you on the Phase III release for elagolix -- or in the Phase III release for elagolix, AbbVie included the sentence that there were dose-dependent increases in bone effects. I haven't heard your opinion of that sentence and what that could ultimately mean. I guess what I specifically wondering is, can you remind us what the FDA has requested to see from a safety study? And what type of bone effects do you think would begin to either give the FDA pause or begin to decrease the clinical differentiation of elagolix versus Lupron and the other agents out there?

Sure, thanks, Phil. That's a good question. So let me start in reverse order.

We know for drugs like Lupron, if you treat a group of women for six months, there is a reduction in bone mineral density as measured by a DEXA scan, with a mean change for the population in that 6% range. And the data varies between 4% and 8% or up to 10% every year, so mean change is big. Now, you get a distribution around that mean, so you have outliers. And women with clinically significant bone loss, that is very common with Lupron.

So what we'd expect with elagolix is that the mean changes are very small. And the distribution around the mean change in such that you don't have outliers -- women with clinically significant BMD reduction. Now, you say, well, what does that mean? Clinically significant BMD loss in a 30-year-old woman with endometriosis, you're talking 5%, 8%, 10% reduction in BMD. Remember the precision of a DEXA scan is plus or minus 3%.

So when we reported our PETAL trial, the six-month treatment with 150 milligrams per day, the mean change for the group was less than 0.5%. And we didn't have outliers. You don't see women with 5%, 8%, 10% BMD reduction on an individual subject basis. So what AbbVie told you in the press release is that the data they've seen is that it was comparable to previous trials, meaning the 150 milligram dose. And that for doses that were not reported on in the past, i.e., the 200 milligram b.i.d. dose, there was that dose-related change in BMD.

Not a surprise. When you get increased reduction in estradiol, you'll see increased impact on BMD as measured by DEXA. What they didn't tell you and they can't tell you yet is at the end of 6 and 12 months of treatment, what proportion of women had clinically meaningful reduction in BMD. Were there outliers with 10% BMD or 8% BMD loss? And obviously they haven't reported that. We don't have that.

That's individual subject level data, and the study was not unblinded at an individual subject level. This was just a treatment level analysis for topline results. But that's what you'll want to know, and that's with the FDA wants to know. There is no statistical standard that elagolix will be held to at the time of NDA for bone. It's not like the primary efficacy endpoint.

The FDA has said this is a risk/benefit determination. We'll look at see what proportion of outliers you have and, if any, whether that's appropriate for the level of clinical benefit that you get with elagolix. So that kind of discussion you'll hear at the Advisory Committee level or somewhere down the road when you hear that kind of discussion.

That's very helpful, thank you.

And then second, on the Tourette study, could you give us some idea of what is a clinically meaningful change in global severity of tics?

Sure, there's a really nice paper published recently where that very question was analyzed, the Yale Global Tic Severity Scale. Patients typically come in with baseline scores in the low 20-point range, and a clinically meaningful change was considered to be about a 4-point change if they come in at the level of severity.

Okay. So it would be like a 25% change wherever they start on the spectrum?

Yes, 20%-30%, in that range, depending on the study and who is conducting the study, how severe they were at baseline, absolutely.

And then one more for me.

Congenital adrenal hyperplasia, can you give us some idea of what a likely Phase III endpoint would be? First of all, would it be clinical or biomarker? And if it's clinical, what would that be?

I wish you the answer for you. We'll know that after our end of Phase II discussions next year. But my goal is that this is what is called the regulatory language of Subpart H, meaning that you get approval based on clinically-accepted biomarkers. Now, the biomarkers that clinicians use to manage these patients are the androgens that are collected. And those are the things that we're measuring, like 17-hydroxyprogestrone or 17-OHP.

So ideally, we could get this orphan drug approved on the basis of these biomarkers -- these clinically validated and accepted biomarkers. And then post approval, and consistent with what a Subpart H is, have clinical follow-up data to corroborate what was seen in these trials. Because those kinds of things are -- if you start treating young kids at a very young age, what is their growth velocity and how does that compare to standard of care?

So this is clinical data collected on height over a period of many years. That's not an appropriate endpoint for an orphan indication like this, but that's the kind of thing clinically that would be interesting to see. I don't know what the FDA is going to -- this is the division of metabolism and endocrine products. They understand CAH very well; they understand these biomarkers. So that's what our hope will be going into this, but I'll have to update you after we have those meetings.

That's very helpful. Thanks for taking my questions.

(Operator Instructions)

Thomas Wei, Jefferies.

Just had a couple of questions. One is on the breakthrough status for 854, and wanted to see if you had been able to, since last time we spoke, had any feedback from the agency on how they think about the class black box warning for this class of drugs? And is it a possibility that you could get that removed, or is that something that we should assume is on the label?

Hello, Thomas, thank you.

The warning that's on the label for the only two VMAT2 drugs that have been approved for human use, reserpine and tetrabenazine, relate to the suicidal ideation. And we haven't had the chance to have that discussion in the context of breakthrough therapy at present, but it's a lot of history to overcome. And we know from the FDA's actions to date that many, many drugs have that same black box warning of suicidal ideation. For example, all of the antiepileptic drugs, the AEDs, have a class label for suicidality. Even though as Dr. Temple and others have argued, that doesn't make a lot of sense. That, nonetheless, is where we're at; and I think it's a tough hurdle to overcome.

Do we hope that we will have clinical data from our long-term trials that say, while this may be a class risk, we don't see evidence of suicidal ideation being worsened in this population? I hope that's what we can do. These are patients with really challenging psychiatric and medical problems, and they have a background rate of suicidal ideation that's very real. About 40% to 50% of the patients that actually enroll in our trials have a history of suicidal ideation or even suicidal attempts at some point in the past.

So we know this is real. And our goal is that we've done such a good job of selecting the appropriate doses with our highly selective compound that we actually have a good safety signal and hope that data rules the day.

My second question was as you're starting to get a critical mass of patients into the trial, anything that you can tell based on these new centers in the screening process that looks different from the prior studies or different relative to how you thought the patient population might look in terms of baseline demographics?

No, they're the same.

That's helpful.

And then my last question was given the competitive dynamic people are now looking at your drug/Auspex's drug, the two different trials that are being run in the same indication. And I'm getting some questions around the titration or lack thereof. That's one of the differences between the two programs. And so it would be helpful if you could remind us, you had a titration scheme in the successful study that allowed people to get to whatever dose they wanted to get to. And Auspex is employing something that seems quite similar to that in their Phase III trial.

But you've gone forward with fixed dosing, based on your PK modeling. Can you give us some comfort that that's the better approach and that people won't need flexibility of doses in the market?

I think those are two interesting but very different questions. Meeting flexibility and the need for titration are slightly different. So let me see if I can touch on that.

In the Kinect 2 trial, where we had a stepwise dosing, that was not done because I needed titration. That was done because that was the first trial I had ever done in patients with mood disorder and tardive dyskinesia. So they had a history of depression or bipolar disorder. And at least historically, people have raised the hypothetical concern that a VMAT2 inhibitor in this population might be riskier.

And so when we designed the 1202 study back in -- almost four years ago now -- we had that consideration in mind. And we were running that trial -- we started that almost just months after we started the 1201 study. And so we didn't know what dose ultimately would be the best dose. And so we designed that trial.

We didn't need to titrate. We don't think we need to based on the nature of our compound. And in fact, when we met with the FDA at the end of Phase II meeting, they clearly understood that. And they said that they wanted to see a fixed-dose pivotal trial. And we're happy to do that because we think fixed dose is good, so that we don't need to titrate our drug for efficacy. But they also agreed that they wanted to see a lower dose and a higher dose.

And we had very beautiful exposure response data that told us quite clearly that you can capture a certain proportion of patients with a low dose, and you can capture the rest of the patients with a higher dose. And that going up any higher doesn't give you additional benefit. And so that's how we ended up with the 40 milligram and the 80 milligram dose in the Kinect 3 trial.

So we don't think you need to titrate our drug. And we think it's very simple, once a day. Start everybody on 40; and if they're not a responder, you could always put them on 80. That's a very easy program to do. Clinicians like that.

Thanks.

And it appears we have no further questions at this time. I'll now turn the program back over to President and CEO, Kevin Gorman, for any closing remarks.

Thank you very much.

I think as you've heard here, we've got all of our programs moving swiftly forward. And as I said before, this is going to be a very exciting year with all of the clinical trial readouts. Not including the first Phase III readout in endometriosis, we have seven more trials to read out this year. I find that especially impressive seeing as how this covers six different indications, and we're doing those with four different compounds. So between ourselves and our partner, AbbVie, I'm really looking forward to a wealth of good data as the year goes on.

We're going to have an opportunity to talk about this data as it comes out at multiple conferences that we'll be presenting at. Starting with Tim is presenting at the Leerink Conference on Wednesday of this week, as long as he can make it out there with the weather that those of you on the East Coast are having.

So throughout the year, we're looking forward to talking to each of you and all the questions that you have for us. Thank you very much.

This does conclude today's program. You may now disconnect. Thank you and have a great day.