Neurocrine Biosciences Inc (NBIX) 2016 Q3 法說會逐字稿

Good day everyone and welcome to today's program. At this time, all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the question and answer session. (Operator Instructions.) It is now my pleasure to turn the conference over to Mr. Kevin Gorman, President and CEO, please go ahead sir.

Thank you very much and welcome everyone to our third quarter earnings call. I'm joined today by Tim Coughlin our CFO, Chris O'Brien, our Chief Medical Officer and before we get started since we will be making forward-looking statements, 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 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. So, much of this quarter our efforts have been around preparing for commercialization of INGREZZA. We now have a PDUFA date as we learned in this quarter. The FDA gave us priority review and a PDUFA date of April 11 of next year. Chris will be taking you through the progress of INGREZZA and its ongoing clinical trials, both the ongoing clinical trial extension studies in tardive dyskinesia and also the two Phase II studies in Tourette Syndrome.

In addition, this past quarter, our partner AbbVie with elagolix had a number of presentations at the American Society of Reproductive Medicine and they introduced their disease state education campaign in addition to all of the data that they presented, I believe, in eight presentations throughout that. I think many of you have already gotten all of the post, there's some slides that have been associated with those presentations but we'd be happy to entertain questions for those either during this call or offline.

Right now what I would like to do is turn the call over to Tim to take us through the financials for this past quarter and year-to-date.

Okay, thanks Kevin and good afternoon everyone. We appreciate you attending our third quarter 2016 earnings call. This quarter, similar to the second quarter, is fairly straightforward from a fiscal perspective. Cash expenses for research and development as well as general administrative continue to increase as we prepare for the potential commercial loss of INGREZZA in tardive dyskinesia. From a cash perspective, we ended the quarter with over $385 million in cash investments and receivables, again, a very strong financial position.

Our loss for the quarter was $36.9 million or $0.43 per share and this compares to the loss of $34.4 million or $0.40 per share for the third quarter of last year. Our net loss for the first nine months of 2016 was $96.4 million compared to the loss of $59.6 million for the first nine months of 2015.

When comparing of expenses from 2015 to 2016, it's important to remind you of investing of certain performance RSU's that happen during the third quarter of last year. The positive top-line results of the KINECT 3 study in 2015 caused certain performance RSU's to vest. This is only a significant one-time increase in our share-base compensation expense in the third quarter of last year of approximately $8.3 million. This distorts comparison of third quarter 2015 to the third quarter of 2016.

So R&D expense in the third quarter actually decreased by $3.5 million over the comparable period in 2015 but they were up $12 million year-to-date in 2016 compared to 2015. In addition to the aforementioned share-base compensation expense change, the primary drivers of these changes in R&D expenses of the cost associated with ongoing clinical efforts in tardive dyskinesia and our NVA preparation activities for INGREZZA. Additionally, our clinical and CMC teams are increasing their focus on both Tourette's and essential tremor programs.

We are also making excellent progress on moving another compound back into the clinic for congenital adrenal hyperplasia program. General administrative expense increased quarter-over-quarter and for the first nine months of 2016 compared to the same period in 2015, up $6 million for the quarter and almost $21 million year-to-date. The main driver of this increase was external consulting up by almost $12 million primarily related to the commercial preparation of INGREZZA. In addition, personnel related expenses increased by approximately $8 million year-to-date compared to the first nine months of the previous year.

These personnel and external consulting costs were almost entirely incurred across all facets or our newest departments. Our MSL group which is fully deployed in the first quarter, our marketing health economics, payer relations, [head] sales force preparation groups. While we have increased spending significantly we have done so in a judicious and prudent matter. Accordingly we are revising our 2016 expense guidance downward by approximately $20 million. This is primarily the result of lower than budget headcount coupled with lower than expected costs of external resources in both R&D and G&A.

In a few minutes Chris will speak to you about our R&D progress this year and he will convey that we have remained essentially two [planned] across all of the programs. We have been diligent in our R&D spending, added headcount only when necessary and anticipated need is not materialized. Our current employee base have been able to manage the MDA filing while continuing to move the other programs forward.

In addition, the R&D costs related to external development across our clinical programs has all come in well under our preliminary estimates. On the G&A front we have added significantly to the MSL marketing and sales headcount throughout the year and have also been engaging the appropriate outside consultants to help prepare for the commercial launch of INGREZZA.

The G&A budgetary savings are mainly driven by the timing of events rather than a true ongoing lower cost of operations. For example, our G&A headcount will essentially be on budget by year-end. For the timing of adding some of these personnel migrated from early to mid-2016 until later in the year. External spends were also completed on an as-needed basis. Both of these have resulted in a savings [two] plan throughout the first nine months.

Accordingly our cash burn for the year has also decreased and we now expect to end 2016 with over $340 million in cash investments and receivables. So with that I'll conclude my prepared remarks. Our 10-Q is on file with the SEC if anybody wants to see any more details and I'll turn the call back over to Kevin.

Thank you. As Tim has said there, we've basically fully hired into our entire marketing group, medical affairs, the payer market access group and our health economics outcomes group. As he said though, we do stay diligent on our spend that I do have to congratulate those groups along with R&D in how well they have controlled our external costs. We're not -- we're certainly going to spend absolutely everything that is appropriate for a successful launch and to support INGREZZA post launch but the groups have done a terrific job and have exceeded our expectations about what they can actually accomplish here. So we are going to have lower expenses for the year.

So, what I would like to do now so Chris can take you through INGREZZA in particular and then the other portfolio compounds, Chris?

Thanks very much Kevin and thanks for participating for those online. Let me save INGREZZA until last so I'll quickly walk through the other non-VMAT2 programs. As pointed out, the congenital adrenal hyperplasia program is on track for us to bring that follow-on molecule in as a new IND. I would like to have -- we plan on submitting that end of this year and we should be back in the clinic in 2017 for CAH.

The essential tremor program is currently in the midst of a multiple ascending dose sequence and pending the results of that trial, the safety of the PK, etc., we would then plan on starting a proof of concept trial in essential tremor next year so they'll probably be no real additional disclosure around that program until we're at that point.

Now, the elagolix activity has been very intense as mentioned they -- our colleagues at AbbVie had a large rollout of data and are present at the SRM meetings earlier this year and really impressive amount of work that's going on looking at the [HEOR] aspects of endometriosis, the burden of illness, the impact of and the cost of managing the disease state and adding context of an effective oral medication for managing endometriosis associated pain. Really opens up a whole new opportunity in this space of women's health for a very large underserved market.

So we're very pleased with the progress that AbbVie has been making and they're on track for the NDA next year as they have outlined. So let's turn now to the VMAT2 program, INGREZZA, valbenazine and as you've heard so far, tremendous progress has been made as we've previously discussed the NDA for tardive dyskinesia was submitted in August and we had official acceptance of the submission by the FDA with that announcement in October and the PDUFA date has been determined as April 11. Now, if you do the arithmetic from October to April you'll see that this is indeed a priority review. That means the FDA is very aggressively going through the review process and we anticipate being engaged with them on discussion as the months unfold leading up to the April PDUFA date. So very, very pleased with that priority review status and our accelerated timeline if you will.

The tardive dyskinesia program obviously the pivotal studies are complete and we have ongoing right now a so-called 1402 study or a KINECT 4, that's the one-year open label safety study. We still have a few dozen subjects that remain enrolled in that trial and that will complete in early April. Obviously completion of that study was not a controlling factor in our timing of submission of the NDA.

In addition to that KINECT 4 study, we have the 1506 study which was really a trial that was designed to give access to drug for subjects that have been in our previous studies who had expressed a very impassioned or desire to stay on valbenazine before its commercial availability. So that trial has allowed more than 100 subjects to continue to get access to drug for up to 72 weeks of treatment and that's going well.

The Tourette Syndrome program is moving along very well. The press release earlier, two weeks ago, announced the closing of recruitment for the T-Forward study, the so called 1505 Adult Tourette's Trial. As you recall this is a placebo controlled study in adults with Tourette's comparing two doses of INGREZZA to placebo using the Yale Global Tic Severity Scale as the primary endpoint. This trial was originally designed to enroll approximately 90 subjects and we found somewhat to our surprise two interesting things right as we were getting ready to wind down the enrollment process, the sites had recruited a large number of subjects who are highly qualified for this study so we ended up with a slightly lower screen failure rate than we had anticipated which means that we enrolled more than the 90 subjects in the trial. So the sites were very enthusiastic, the quality of the subjects enrolled was very good and we're very pleased with the conduct of that study.

You can do the arithmetic with last patient last visit anticipated eight weeks after the enrollment and then time to clean and lock the database. We should be reporting out top-line results from the T-Forward study in mid-January. So that is something that we're very much looking forward to.

The pediatric Tourette's trial was also going well and that is the T-Force GREEN study or the 1501 study. That study started approximately a quarter after the adult study started and it's approximately two-thirds enrolled at this present time. So we find obviously it's always harder to enroll small children in clinical trials. I assumed this study would enroll faster than the adult trial simply because there's so many more patients with Tourette's that are pediatric age but we're marching along at a good pace and we would expect completion of screen for this trial by the end of the year with top-line results a couple of months after the adult study.

So that is going very nicely and depending on where you live you may actually be hearing radio campaign ads. We get a lot of calls saying, hey, I heard your recruitment ad for the T-Force GREEN study which is currently running in North America.

So, that Tourette's program is going well. Now, to support all of this INGREZZA activity, particularly with respect to tardive dyskinesia, the medical affairs group has been very busy. The Health Economics and Outcomes Group is involved in a range of activities to help support commercialization of INGREZZA. The field-based MSL teams are very engaged with the scientific leaders across the country at scientific meetings and workshops and in a variety of data analysis and publication activities.

This year there have been 24 abstracts for INGREZZA at scientific meetings. The next two to come up we hope will be first opportunity people have to see some long-term safety and efficacy data so keep your eyes and ears open for that coming up and obviously multiple manuscripts are either under review at journals or in preparation to help support the data from INGREZZA trials.

So that's a range of activities that are going on right now for CAH, ET, [TD], TS and (inaudible) and with that I'll turn it back over to Kevin.

Thanks Chris. I failed to mention that one of the other things that we are also spending quite a bit of time and effort on is getting ready for almost certainly we would be having an advisory committee meeting. We feel that that would happen probably sometime in February and so we're doing everything to be completely prepared for that when we're advised of a scheduling for that.

So, with that why don't we open it up for questions now?

(Operator instructions.) We'll go ahead and take our first question from Ian Somaiya with BMO Capital, please go ahead, your line is open.

Hi this is [Nate] on for Ian, thanks for taking my question. So, first could you comment a little bit more on the specific preparations that you're doing for the valbenazine panel and then on Tourette's what gives you confidence in the upcoming Phase II readouts and if you -- if the data are positive would you advance in the Phase III's are they needed? And what would you do if the data are mixed? Thank you.

Yeah, I'll take the first question. So, with getting ready for an advisory committee it's nearly as much work as preparing your NDA for submission. So we have the full team working with an outside group in order to prepare all of the slide decks in order to be able to answer everything that an advisory committee would ask. Also, our book, briefing document that would be submitted to the FDA in advance and to the advisory committee members. We also do mock panels in getting ready for the advisory committee meeting, actually multiple mock panels and we try to, in every way possible, both physically and also in how they would be conducted, to be identical to an actual advisory committee meeting.

Chris do you want to take the second half on TF's?

Yeah, so the second half was what would we do once we have the results of the adult Tourette's trial which we anticipate in January. So, if the results are mixed and it depends on what they're mixed about, obviously if it's -- I assume it's going to be a very informative trial so we will act on whatever the trial informs us. I mean, if it says this dose is better than that dose or these investigators are more reliable investigators for future trials, we'll learn from all of that information. But one -- I assume that we'll see a reduction in tic severity based on the global primary endpoint and then the question is, how does the FDA see that data and what is our path forward? And for that we will need to sit down and talk with the FDA. So I can't tell you what the next step is until I have that discussion with the FDA going forward and that's for the adults. For the Tourette's pediatric population, obviously we've always assumed that pediatrics are different than adults and that it is more likely than not that we will need additional studies in pediatrics for a submission to the FDA and again I need to sit down, once I have data in hand, meet with the FDA and reach a consensus on the path forward.

Great, thank you.

Thank you. And we'll go ahead and take our next question from Alan Carr with Needham & Company, please go ahead your line is open.

Hi, thanks for taking my questions. Wondered -- you talked a bit about your outreach with MSL's and [measures], I'm wondering if you can give us a sense of how that's going with sort of feedback you're getting. Any areas of resistance maybe and then which specialties are you targeting? Thanks.

So the MSL's are working with both psychiatrists and neurologists because both groups have an interest in tardive dyskinesia. What we're hearing is no surprising; namely that the part of dyskinesia that some of us knew from 30 years ago, with first generation high dose antipsychotic medication is less prominent today that we don't see the same high-amplitude severe TD that we did 30 years ago. But, we also hear quite loud and clear from all of our docs that even though the severity is less prominent, the prevalence is greater. That there is a lot of tardive dyskinesia in America and it's present and prevalent even in the face of second generation atypical antipsychotics. For example, we were recently at the U.S. Psychiatry Congress meeting in San Antonio and the MSL's had a medical affairs booth at the meeting and literally hundreds of psychiatrists came by to talk about what they see in their practice and they see a lot of TD and we hear this from academic psychiatrists, community psychiatrists, psychiatry nurse practitioners, etc., so that interaction has been going well.

What we have learned is that the psychiatrists generally don't know much about VMAT2 as a target and when they learn that there's a new mechanism and a potential for a new medication they become very excited and they want to know more. Every single one that we talk to have said that a key component of any program going forward is education about TD and so that's obviously an important focus of the medical affairs group now and it will obviously be a focus of the commercial group post launch.

All right, thanks very much.

Thanks Alan.

Thank you and our next question comes from Charles Duncan with Piper Jaffray, please go ahead, your line is open.

Hi guys, thanks for taking the question and congratulations on a good quarter of progress. My question was along the lines of KINECT 3. Chris you mentioned that there had been I think about 100 subjects or as much as 100 subjects for up to 72 weeks. I'm wondering if you can provide any more color on the number of subjects actually in and any additional color on the experience in terms of the number or the persistence within that study so far?

So Charles, thanks. Perhaps I wasn't quite clear on that. What I was talking about was the so-called roll-over study or the 1506 study and in that, that's more or less just an opportunity to receive open label drug in a post-study environment. It's open to anybody who is in KINECT 3 or KINECT 4 after they had finished one year of treatment in those trials if they still wanted access to drug. So as you remember, or may recall, KINECT 3 and randomized 234 subjects and that KINECT 4 had I think a hundred and something subjects, I can't remember the number right offhand and so when we opened up that opportunity for people who have been clambering for continued access to drug, we calculated that it would be somewhere in the 100 to 200 range and originally thought it was going to be 75 but we couldn't accommodate everybody who wanted to get in. So, that's that trial. It's not part of KINECT 3 directly or KINECT 4 directly.

But the patients continue to benefit.

Absolutely, absolutely. Yeah, there's no question that the investigators, the patients, the caregivers want these individuals to continue to receive drug because there's a perception of benefit.

Okay, that's helpful. [My bad] on the specific nature of that study. If we could hop over to Tourette Syndrome, Chris you also mentioned that you're a little bit surprised that the adult trial enrolled as quickly as it did or that there was as much demand and versus the pediatric trial are you more surprised that the pediatric trial didn't enroll quickly or more surprised that the adult trial did enroll quickly and what does that say about the awareness of Tourette's and the interest in this area?

So I guess I was more surprised that the enthusiasm for the adults to get into the trial because as you know, it's a much, much smaller number but there really was -- seems to be a pent-up demand for a drug that's potentially better tolerated than the approved antipsychotics. What I'm not surprised at is it's easier to recruit adolescents than it is young children for clinical research. And that's independent of what indication you're talking about. And that's not a surprise at all. That doesn't mean there's not interest. The interest is really high. One of the interesting challenges has been for the kids who have really severe tic disorder, most of them on are antipsychotics that is dopamine receptor blocking drugs like Pimozide or Haloperidol or Risperdal or Abilify and they're obviously not satisfied by those treatments so they want to be in a trial but for these Phase II studies we had designed them to be for Tourette patients who are not receiving (inaudible) antipsychotic medication. And so that means that they can't enroll for this Phase II study. Now, in the future, would we have studies that allow people to be on antipsychotics just like we did in tardive dyskinesia, probably, but for these early Phase II studies we just had that as an exclusion criteria and hence a lot of the patients and families who were eager to be enrolled in these trials couldn't.

Okay, that's helpful and the last question is in terms of going to market with INGREZZA, I have to ask because I cover (inaudible) but I'm wondering if you were to see approval for the drug in say April, if you'd be able to launch shortly thereafter?

((Crosstalk))

-- manufacturing process.

Yeah, what our plans are is that from a manufacturing a drug standpoint, it will be ready within 72 hours after an approval, knock on wood, comes through. So, from a sales force standpoint what we what we're hired thus far is much of the management of the sales force; the national sales director, the east and west zone managers and six out of the ultimate 18 regional managers. What they're all doing right now is going through thousands of applications for sales reps and so they're sorting through those, first just on paper and then taking the top of those, going through video interviews and then we have several hubs across the United States that we're bringing then the finalists in such that mid-January is our goal to have contingent offers to the entire sales team and the remaining regional sales managers.

And then what we do with that is that all of them are in place locked and loaded at the time of, again, knock on wood, an approval on April 11. They then give their two weeks notice because the vast majority of them are employed with different companies. At the end of that two weeks then they will have approximately a two week home study that they'll be doing then we bring them all down here to San Diego for an additional two weeks of training and then they're deployed. So post approval we would be launching six weeks with the full field force.

It's helpful. Thanks for the added color.

Thank you.

Thank you and we'll go ahead and take our next question from Jeff Meacham with Barclays, please go ahead your line is open.

Afternoon guys, thanks for the question. Chris on valbenazine I wanted to ask you about Tourette's. Just thinking about the disease variability itself and how that's captured in the Yale Global Tic Scale, curious if it's as predictable as it was with the AIM scale in tardive and what would you view for the adult and pediatric studies as a clinically meaningful result?

Thanks Geoff. So, Tourette's by its very nature is probably a little more variable. Oftentimes people would -- tics one set of motor tics or noise tics will wax and wane over a six-week period and a new set will come on and they kind of keep rolling through different kinds of tics over time. So the studies obviously are designed to take that into account.

We know that there's a certain amount of variability over time so when we do our sample size estimations and power calculations those are built into those assumptions. Now with the Yale Global Tic Severity Scale is a scale that looks back on the prior week so if there is some waxing and waning from day-to-day the clinician, the caregiver and the parent of the child or the patient are able to capture that information of over the past week in terms of both noise and movement tics and that ultimately gives the score.

Now, in clinical trials with Tourette's. We typically enroll people who are fairly symptomatic and what that translates into is a Yale Global Tic Severity Scale Score of 25 to 30, something in that range.

And it's usually plus or minus eight and that would be a typical well run placebo controlled type trial. And in those studies we have some literature that informs us about what would be a clinically, minimally clinically -- minimal clinical improvement detected so an MCID and this score is typically at a minimum a four point change but most clinicians like to see a six or seven point change to have substantial relevance and when you look at clinical trials of Tourette's that have been well controlled with an effective agent, typically what you'll see is for the group a 30% reduction in tic severity as kind of being your -- this is what we need to be at least a decent clinical affect.

So we know in our trials to date, blinded base-line data are in that 30% range, we have a good handle on variability and consistency among the [raters] and we assume that we'll see an effect size of at least that magnitude.

Gotcha, okay. And I know AbbVie is obviously running the program for elagolix but I wanted to kind of get you guy's perspective on how much work has been done in the past on co-formulation with [Advac], you've probably gotten that question a lot. Is it easy to do, do you feel like that could be a major differentiator down the road or does the data and EM sort of speak for itself with respect to an [Advac] on a separate basis?

Yeah, Jeff, AbbVie has not disclosed what their plans are for the introduction of the drug so I think that's probably more of an appropriate question for them and not us at this point.

Okay.

Okay?

No worries, yeah. Thanks.

Thank you.

Thank you and we'll go ahead and take our next question from Anupam Rama with JP Morgan, please go ahead, your line is open.

Hey guys, this is Eric in for Anupam this evening, thanks for taking the question. So our understanding is that valbenazine or INGREZZA NDA is being reviewed by the psychiatric division [redirect there], in which case I just want to get a sense of what that divisions experience is with medicines meant to treat more neurological indications. Is there, you know, significant experienced overlap with the neurology division or any precedent that you might point us to there?

Eric you are correct that valbenazine is under review by the Division of Psychiatric Products. They are very knowledgeable about tardive dyskinesia; they have been dealing with this for decades. They are very knowledge about the AIMs as a primary endpoint and they are completely confident and comfortable handling this and they have a long track record of doing these kinds of things so for example the Tourette's Syndrome program tic disorder sets in the psychiatry division. They have a responsibility for those programs. They have a long history and they certainly understand the place that these involuntary movements have in the overall setting of people suffering with significant mental health issues. So they really are probably the best division to take this on but that's the way it's done.

Got it thanks. And maybe I guess I have to ask, you know, given the relatedness to xenazine or Tetrabenazine and the intended use with antipsychotics, how are you thinking about the potential for a black box warning and would -- if a black box warning does actually take place, what impact would that have or a potential REM have in terms of launch timing? Thanks.

No impact on launch time. The -- I mean, obviously I was involved in the development of xenazine in my former life and I've used VMAT2 inhibitors as a clinician for 30 years and there's a long baggage or history about VMAT2 with Reserpine as a drug that had significant issues. So I would not be surprised if we get just a class label for a VMAT2 inhibitor with respect to suicidality and I mean, the FDA has been giving class label for suicidality for epilepsy compounds, for SSRI's, across a whole spectrum of things so I would expect that any VMAT2 inhibitor would has class labeling. We certainly haven't' seen any data has been quite good in that respect in terms of safety signals. So, again, I think class labeling is probably a reasonable expectation but data that supports a good safety and tolerability profile.

We'll argue for --

Yeah, Tim is correct, we will argue for not having it but at the end of the day of the docs that take care of these patients, are taking care of patients that are usually on two or three drugs at any given moment that all have class labeling for suicidality so they are expert in this population. They know how to manage it and I don't think it's a major impact on the ability to use such a medication.

Great, that's very helpful, thanks for taking the questions guys.

Yes sir.

Thank you and we'll go ahead and take our next question from Phil Nadeau with Cowan and Company, please go ahead, your line is open.

Good afternoon, thanks for taking my question today, congratulations on the progress. First Tim one for you. As we look forward to the launch early next year, how should we expect SG&A expense to trend? It looks like it's been adding about $2 million to $3 million in incremental expense per quarter. Is that reasonable to expect for the next several quarters as well or will there be acceleration?

Yeah, I think it's reasonable to expect a little more pickup in Q4 and probably a little more in Q1 and then in Q2 as Kevin laid out, we'll be brining on the sales force knock on wood. They'll all start April 18 or so and at that point you're going to bring on 150 reps, you'll have a full component of the sales management team then with 18 different regional managers and [two] can call them zone managers. So you've got preferably 160 more people coming on Phil and you can use whatever multiplier you want on that, but that is going to the main driver of G&A next year. The other piece I would mention is, we haven't put pen to paper on this and finalized it yet there's also the external spend outside of headcount. That should run a little bit higher than it is this year but we'll be able to really hone in on that number in our Q4 earnings call in early February but that number is going to run probably in the $20 million range using round numbers right now but we'll be able to put a finer pen point on that. So --

Okay, that's really helpful. And then second on the market sizing at your R&D event last year, you talked about 250,000 to 300,000 patients with tardive dyskinesia who had moderate to severe symptoms and therefore would probably be appropriate for treatment with valbenazine.

As you've done more market research and gone out to discuss with physicians more, has your estimation of the number changed or is 250,000 to 300,000 still the right number?

I think the 300,000 is still the right number for the moderate to severe category. We've been conservative and we're going to stay that way at this point. There is -- when you look at some of the literature they would point you to a higher number as far as the prevalence rate but we can right now put our hand over our heart and look at ICD-9 codes that get us to that 300,000 number, we feel good about that for moderate to severe.

So, you know, there is we believe, upside there but right now we're going to stay with that.

Okay, and as we think about doing (inaudible), what physician should we concentrate on to find these patients? I know you said that they're both psychiatrists and neurologists and you seem to find them as well as expert centers but is there someplace that we should really focus?

So Phil, the absolute certainty is that the majority of patients with TD are cared for by psychiatrists. The challenge is, when you go to talk to docs about TD in the psychiatry community oftentimes they say -- it's really interesting that they like to believe that the second generation antipsychotics have been successful in making TD go away and -- but when you actually show them videos of patients with TD, when you actually talk about claims data, when you look at prescription data you recognize that the prevalence really has gone up. So sometimes when you -- if you as an analyst will go and talk to a psychiatrist, the first thing that you'll get is a kind of position like I never see TD or oh my God, I see TD all the time, my whole clinic is filled with it. You'll have people will very strong opinions that are often quite disparate and it's just a reflection of the fact that there's no reason to diagnosis TD, people don't use the codes correctly and there are medical and legal issues around TD diagnosis and they don't have any available treatment to offer patients and they certainly don't want to disrupt the patients psychiatric therapies by potentially scaring them off of taking their antipsychotic.

So, it's really an interesting -- the only thing I would suggest to you is don't rely on the opinion of two or three docs. You really have to go out and talk to a broad spectrum of psychiatrists if you really want to get an understanding of what's out there.

Great, that's really helpful. And last question for me is on pricing. I know it's too early for you to probably come in on the exact price but in the past you've given us ranges for the type of price that you're considering for the tardive dyskinesia market and appreciating that sometimes those ranges do evolve over time, I was curious for your most recent thinking on what would be a good price range for a drug like valbenazine in tardive dyskinesia.

Phil, we're going to stay -- there's no evolution here. We're still at $20,000 to $60,000 per year, 20,000 to 60,000 per year are the net basis.

Great, that's helpful, thank you.

Thank you and our next question comes from Paul Matteis with Leerink, please go ahead, your line is open.

Hey you guys, thanks a lot for taking our questions, appreciate it. Just one for Chris on the Tourette's study in the adult data. Chris, I'm wondering how you would interpret that data in the context of the pediatric study which reads soon after. For example, if the adult study fails do you think it's safe to assume that the drug won't work in pediatrics or vise versa? Be curious on your thoughts on that.

So no I don't think if the adult study fails it would necessarily handicap the [peek] study. The real question is, why would a study have failed? Is it the conduct of the study, is there -- is it the right dose, wrong dose? Were there inclusion, exclusion criteria that should have been different? So it really depends on what happened. If it was a beautifully run study with super clean data and perfect exposures and it didn't work then you end up in the conundrum that I know you and I have discussed before is, is Tourette Syndrome in adults a different pathophysiology than in kids? We've already seen an indication in our open label Phase [1b], T-Force study that we see even with sub-therapeutic doses and short trial. We see a pretty good sized reduction in tic severity. So, I wouldn't let the adult study results handicap the pediatric study unless there was some gross safety signal or something that came out of it.

Okay, great. Thanks a lot.

Thank you and our next question comes from Biren Amin with Jefferies, please go ahead, your line is open.

Yeah, thanks guys for taking my question. Just on [valben]. I believe you started a patient registry for [valben] recently where you're planning to enroll up to 1400 patients across many sites. Is this, I guess, first of all, what's the objective of the registry, can you tell us what data you would collect and is this a patient poll that would be eligible for valbenazine upon approval and product launch?

Hi Biren, thanks. So there is a study that is just getting underway called the reconnect study which is essentially not a valbenazine study, it's a project through our [HEOR] group where community psychiatrists have the opportunity to see if patients have involuntary movements, patients who are receiving long-term antipsychotics, whether they have drug induced movements and if those movements are, in fact, impactful on them in some fashion. So they're collecting data about the presence of movements, whether it's having an impact on their function, their quality of life, that sort of thing. It's, again, it's not a valbenazine study, it's not an interventional trial, it's kind of a cross sectional look at TD presence or prevalence in amongst patients on antipsychotics in community psychiatrists. And so that's something that we would hope to have some data about, you know, some time toward the middle of next year and then if we're lucky and that study works well, those patients can continue to be tracked for a year to see what happens; do they change or not? If not, again it's not a valbenazine trial so there's not a specific intervention for that. It's more to learn more about the burden of -- and the prevalence of TD and the impact or burden of illness.

And would those patients be eligible for valbenazine once approved?

Well, they're not part of the -- they're not a part of the study but if they have TD and valbenazine is approved to treat TD, absolutely they would be candidates for treatment. That would be up to their physician and working with the patient.

And then just on the Tourette trial in pediatric and adolescents, can you remind us what the doses were in that trial? I don't think they're disclosed on clinicaltrials.gov?

Right, it's placebo, low does and higher dose.

Great, thanks for the clarity.

Thank you and our last question comes from [Andrew Peters], please go ahead your line is open.

Hey guys, thanks for taking the question. So, I guess just wanted to ask, and I know you had talked before about kind of some of the efforts on the MS health side building out a bit of market awareness, I just wanted to see kind of what sort of initial or early investment you've started to make in terms of awareness on the payer side? I know you mentioned kind of some of the pharmacoeconomics studies that have gone on but can you describe what sort of early groundwork you've started to lay in terms of those sorts of payer discussions? Thanks.

Thank you [Andrew] and thanks for the coverage also I might ad that just came out today. It's a good question and we've been doing a lot of work with payers. So as I said earlier in the call that we have a full payer market access team in place, they've been in place for some time now. That includes not only the in-house group but also we have the market access team that is out in the field that covers the entire country. They have been meeting with both national and regional payers and also with government payers because that's going to be at least 50% of our patients will probably be covered in some form of government program.

In addition, what we've been doing is quite a bit of market research with, on, payers attitudes, how much they know about TD, what they think about it. We've started out, I think I started talking about this, gosh, almost two years ago about the qualitative work that we started out and then there have been a number of quantitative studies that we've conducted and all of that is just about finishing up here as it comes to year-end.

As with physicians, as Chris has talked about in great lengths with the MSL's, with the payers, there's quite a bit of education that goes into this. And getting impressions and addressing what questions they have which are many about the disease.

Obviously there's nothing to treat it out there so it's not like there's anything that's on their radar that impacts their budget and so we're having very good discussions with payers as we've been going through this process.

So obviously we're not going to make a pricing decision until we have an approval, the last piece to a pricing decision is going to be having our label there but what we're doing is building a value story because it isn't just about quality of life, no, you have to really have an economic value proposition for these payers. And so all of that work has been ongoing and will be ongoing right up until the moment that we launch.

The other thing that I would add with the payers, similar to what Chris said, is that there's different levels of awareness with TD. Some payers are very clued into it, others are at the elementary stage; they're aware of it and that's another place where if you're going to talk to payers our should also talk to more than just a couple to get a sense for what their sense is for the TD population within their patient coverage.

Great, thanks and I guess just one quick follow-up to that. As you think about kind of KINECT 4 in the rollover study, you know, how do you think payer mix impacts the ability to transition those patients to commercial patients once INGREZZA is available? Is that going to be something that you have a pretty good eye on or how do you think about kind of the clinical to commercial rollover from that sense?

Yeah, it's a good question. It's not only with those patients but it's with all patients that are then going to have scripts written for them by the efforts of the sales force that's out there is that as we've directed, this is going to be a slow launch that takes place until you reach that inflection point.

So for the first 18 months or so there's a lot of education that has to go on with the physicians, a lot of misperceptions as Chris has talked about out there, and what in addition that you have that you have to deal with is just getting on formulary with all of these different payers.

And so some of them can take many, many, many months. You know, some Medicare plans you'll be on quickly, others it's going to take a long time; same with Medicaid. The private payers are usually going to be a bit quicker than the public payers to go there. So in the beginning you can imagine for the first at least six months, almost every script that's written is going to be an exception script that's going to go in. So you're going to go through a process where the first time through it's denied and then you have to go through that process in order to get the scripts filled.

What we're doing is we fully anticipate that, that's nothing unique to us either that's what many drugs that are being launched now have to deal with. It's just the timing of when you get onto the formularies and so what we'll have in place and what we've already contracted to is a really excellent hub services so that we can assist both the patients and the providers in getting through that maze as painlessly as possible.

We do realize that about half of our TD population has private insurance and about half has government insurance. So rough numbers. So, that kind of gives you an indication of what was -- Kevin was describing.

Thank you.

Thanks [Andrew].

Thank you and it appears we have no further questions at this time.

So I'd like to thank everyone for your attention today and also the questions. We'll still be at a number of meetings throughout the rest of this year and there's going to be more publications and presentations that you'll see coming out both from ourselves and our partner. So I do look forward to meeting with you as we head into the holidays and stay tuned. Thank you very much.

And that does conclude today's program, we'd like to thank you for your participation, have a wonderful day and you may disconnect at any time.