Neurocrine Biosciences Inc (NBIX) 2017 Q2 法說會逐字稿

Good day, everyone, and welcome to today's Neurocrine Biosciences Reports Second Quarter 2017 Results. (Operator Instructions) Please note this call is being recorded. [Operator Instructions)

It is now my pleasure to turn the conference over to CEO, Kevin Gorman. Please go ahead, sir.

Thank you, good afternoon, and thank you everyone, for joining us today. I'm going to start out, I'll be making forward-looking statements. So prior to getting started, Jane, could you please read our Safe Harbor statement.

Yes. Certain statements made in the course of this conference call that are not historical statements, may be 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, quarterly reports on Form 10-Q and in today's press release. Copies of these filings may be obtained by visiting the Investor Relations page on the company's website. Any forward-looking statements are made only as of today's date, and we disclaim any obligation to update these forward-looking statements. Kevin?

Thank you, Jane. Today, I'm joined by DA Gros, our President and COO; Eric Benevich, our Chief Commercial Officer; and Chris O'Brien, our Chief Medical Officer.

I assume that everyone has seen our press release that went out about an hour ago and clearly, this has been a tremendous quarter for Neurocrine. We're seeing great enthusiasm from patients, healthcare providers for INGREZZA. And I do have to say, that it is extremely gratifying for everyone here at Neurocrine to see the years of their work come to fruition.

Now in this call, Eric is going to be talking about the launch in more detail just a little later. I'd like to highlight that the sales numbers we reported in earnings, released this afternoon, demonstrate the need that exists for an effective therapy for TD patients. We do not believe that the demand we are seeing is due to any warehousing of patients, or onetime event such as let's say, the rollover of patients from our extension study. And moreover, we continue to see strong demand for INGREZZA into this quarter.

Now as promised, DA will provide the total scripts dispensed and the net sales for the quarter. And while we're very excited about this, it is still very early days in the launch. So as previously stated, we're not going to be providing information regarding gross-to-net ratio, the number of patients that are under therapy, new scripts versus refills, nor will we be providing guidance for the rest of the year. Give us time for this launch. Let's get through this year and then we'll reevaluate.

Now in addition to having a wonderful launch, we submitted the sNDA for the 80 milligram capsules and our PDUFA date is October 14. The capsules are manufactured, they're just waiting for the approval. We will announce pricing, when we launch the capsules, but as we have stated numerous times, they will be priced substantially similar to our 40 milligram capsules. This is not going to be on a per milligram basis at all.

Now in addition to our activities in the U.S. with INGREZZA, our partner Mitsubishi Tanabe has been working quite hard and they will be starting their pivotal program in Asia for TD patients this quarter. Now we're not just INGREZZA at Neurocrine as many of you know. So what is going on beyond that, our partner AbbVie has remained committed and on track to submitting an NDA for elagolix in endometriosis later this quarter. And they anticipate reporting top line Phase III data in uterine fibroids late this year. And I will caveat that just a little bit. I'm sure you would realize, if the holidays are really come into play, then that might go to very early next year.

We continue to make very good progress on our R&D pipeline and Chris is going to talk about that in more detail a little bit later.

Finally, we significantly strengthened our cash position in Q2 by raising over $500 million through a convertible debt offering. In DA's comments, he'll go through how that's being handled on the balance sheet.

So all in all, an outstanding quarter. But at this point, I would like to turn the call over to DA, he'll go through the financials. He'll be followed by Eric, to talk about the launch, and finally, Chris, to discuss medical affairs and the pipeline. And then, we'll open it up to questions. So DA?

Good afternoon, and let me thank you as well for joining us on today's call. As Kevin highlighted, we had another very productive quarter on all fronts and this is true from the finance perspective as well. The first sale of INGREZZA occurred on May 1, 2017. During the first 2 months of launch, there were 745 total prescriptions filled. Our net revenue for the first 2 months of launch, was $6.3 million. We're using a sell-in methodology for revenue recognition, although the difference between sell-in and sell-through was quite small since our select group of pharmacies and distributors hold less than 1 week of inventory.

We do not recognize revenue for INGREZZA's INBRACE program, where physicians are able to prescribe, sometimes for eligible patients a free trial period of the drug, as they initiate therapy.

We ended the second quarter with total assets of $754.1 million, including cash, investments and receivables of $739.6 million. These assets include the $502.8 million raise after expenses via the company's convertible notes offering, which closed on May 2, 2017. Our loss for the quarter was $60 million, or $0.68 loss per share compared to net loss of $40.3 million or $0.46 loss per share for the same period in 2016. For the 6 months ended, June 30, 2017, the company reported net loss of a $138.3 million or $1.58...

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Loss per share, as compared to net loss of $59.5 million or $0.69 loss per share for the first half of last year.

Research and development expenses decreased to $21.9 million during the quarter compared to $26.9 million for the same period in 2016, principally due to the completion of pivotal studies for INGREZZA. For the 6 months ended, June 30, 2017, R&D expenses were $73.8 million compared to $50.8 million for the same period last year. This increase was primarily due to a $30 million payment in the first quarter of 2017 from our entering into an exclusive licensing agreement with BIAL for the development and commercialization of opicapone in the United States and Canada, which was expensed as in-process R&D.

SG&A expenses increased to $41.7 million for the second quarter of 2017 from $15 million for the second quarter of 2016. For the 6 months ended June 30, 2017, SG&A expenses were $69.7 million compared to $26.9 million for the first half of 2016. The increase in SG&A is primarily due to commercialization activities for INGREZZA and in particular, the on boarding of our full sales organization.

And now looking forward, starting with revenues. In term of milestones from our partners, we expect to receive a $30 million milestone payment from AbbVie in the second half of this year, upon acceptance of the NDA for elagolix in endometriosis. Also, in the third quarter of 2017, we expect to receive $15 million in milestone payments from Mitsubishi Tanabe from their initiation of a pivotal trial of INGREZZA in Asia for the treatment of tardive dyskinesia. In June, we amended the lease of our headquarters and extended it until 2029. As a result, we will now recognize approximately $9 million remaining in our deferred gain relating to the sale lease back of our headquarters, which will now be through 2029, instead of through 2019.

Looking forward regarding expenses. Cost of product sales is very low this quarter since the vast majority of the costs related to the initial sale inventory was already expensed in accordance with GAAP, when the product was manufactured prior to FDA approval. Cost of product sales will thus increase as a percentage of sales over the next quarters as we turn over inventory.

Correspondingly, the value attributed to inventory on our balance sheet is low this quarter, and it too will increase through the second half of the year and into 2018, as we complete new production runs and product is capitalized into inventory.

With regards to SG&A, while during the second quarter, we have seen the largest quarter-over-quarter increase we expect for the year, SG&A will continue to increase at the commercial organization further ramps its activities. R&D on the other hand, has reverted to more regular baselines since our payments to BIAL last quarter was a onetime event.

Turning to our convertible debt and its interest expense. We completed a $517.5 million financing of convertible debt in May. This new convertible debt has been added to the balance sheet, net of debt issuance costs. The carrying amount of this debt on the balance sheet will increase through the maturity date of May 2024, when the value on the balance sheet will equal the face value of the debt. This accretion in liability is charged to interest expense over the 7 years.

In addition, the notional interest at 2.25% is also charged to interest expense. This new debt will add approximately $20 million in interest expense to our P&L during 2017. Interest payments are due every May and November. So approximately $6.3 million of this interest expense will be paid in cash in November 2017, while the remaining approximately $13 million accretes the balance of the long-term debt liability. The convertible debt was now taken into account when we gave our original expense guidance for 2017. So the debt interest expense is incremental to our earlier guidance.

Finally, this date was primarily placed with high-quality, long-focused debt funds. It has a low coupon, a very tight file to offer discount and a conversion premium at 142.5% of the market price, with a 4-year no call, 3-year provisional call provision.

I'll conclude my prepared remarks here, but for those who're looking for additional details, our queue is now on file. And with that, I'll turn the call over to Eric.

Thanks, DA. We have now completed our first partial quarter on the market with INGREZZA. And I'm pleased with the execution and the results of the early phase of our launch. As I previously described when INGREZZA was approved back in April, we're executing on a commercial plan that is focused on several key strategic imperatives. Educating healthcare providers or HCPs on the range of TD presentations and patient types. Building awareness of INGREZZA as the first and only treatment for TD. Supporting it, patient access through our patient services hub and active engagement with pairs to drive broad reimbursement. So let's dive into these topics.

We have multiple types of healthcare professional awareness efforts underway currently to increase TD recognition and build familiarity with INGREZZA. The majority of our current promotional efforts are focused on psychiatrists who are the largest segment of the market as well as a numerically smaller but strategically important subset of neurologists that specialize in movement disorders. To date, our specialty sales team has now reached virtually all of our target HCPs, at least once, with tailored messages about TD and INGREZZA. In fact, many of our priority targets have been called on multiple times.

Beyond direct personal promotion in Q2, we had a significant commercial presence in major medical meetings, including the American Academy of Neurology, the American Psychiatric Association and the International Parkinson's and Movement Disorder Society annual meeting, where we hosted exhibits for strong boot traffic and organized product symposia, that drew crowds that were standing remotely. In addition, we conducted a well attended national broadcast webinar and have conducted local peer-to-peer speaker programs for HCPs throughout the country. These live programs service educational forums for healthcare professionals, who wish to learn more about TD and INGREZZA.

To date, we've been very pleased with the early feedback from the medical community. HCPs in psychiatry and movement disorder neurologist have been receptive to our educational focus on TD and our message about INGREZZA as the first and only FDA approved treatment for TD. We're hearing from our prescribers that product attributes such as rapid and robust efficacy, the clean tolerability profile, compatibility with common psychiatric medication regimen, and simple once daily dosing without complex titration are motivators for initial product trial. And as a result, we're seeing INGREZZA being prescribed for a wide range of TD patients with varying underlying psychiatric illnesses.

Most importantly, we have been receiving many patients' success stories from prescribers across the country, where treatment with INGREZZA has already made a meaningful difference for patients within TD. With regards to market access, we've already seen reimbursement of INGREZZA across all segments with a pair of landscape, including commercial, Medicare Part D and Medicaid plans. As a reminder, however, it's very early in our launch and payers have not yet conducted formulary reviews of INGREZZA. We expect those reviews to occur primarily toward the end of this year and into the first half of next year. In this early stage of our launch, our national accounts team has been engaging with payers to ensure that they -- as they conduct their formulary reviews, they enact coverage policies, that are medically appropriate and consistent with our data enabling. In the meantime, coverage for INGREZZA is arranged using our formulary exceptions process, featuring prior authorization for non-formulary drugs. In most instances, the requirement from a health plan is simply that the HCP complete a prior authorization form, confirming the patient's diagnosis of tardive dyskinesia.

In summary, we're off to a strong start, and we're excited to be providing a new option for patients living with TD. Our sales team has introduced INGREZZA to their target customers in neurology and psychiatry. And they are also educating allied health professionals in community mental health settings. Our payer accounts team is educating formulary decision makers about INGREZZA as the first and only medication indicated for TD. Tardive dyskinesia is a completely new market, and we are introducing a new treatment paradigm. It will take time to educate the thousands of HCPs that care for patients with TD and to change their ingrained behaviors that are developed over decades.

But we're committed to making a difference for people living with TD, and we are energized and inspired by both the initial results of our efforts and the emerging patient success stories.

With that, I will turn it over to Kevin.

Thank you, Eric. Just one request here to break in on our -- on what we're doing here is that, apparently, conference watched all of the questioners have dropped off the list. So those of you who are going to be wanting to ask a question when we're done with our prepared remarks, could you please queue up again. So sorry about that. Thank you, I see that we've started to queue up, right now. That's perfect. Thank you. Chris, I'm sorry.

Thank you, Kevin, and thank you to the participants on the call. The critical and medical groups continue to be very productive, working hard and they are achieving some pretty significant goals. So let me talk through some of these updates.

For tardive dyskinesia, of course, the focus has moved from running clinical trials to now data analysis and publications of INGREZZA from these studies. We anticipate over the next 6 to 9 months, multiple manuscripts and presentations at INGREZZA scientific meetings. And in particular, we're very pleased to focus on a long-term safety and efficacy data, growth metabolism data, a subgroup analysis looking at different kinds of response to INGREZZA, in specific, some populations and other topics. So anticipate, you will continue to see a steady stream of output from the clinical and medical groups.

As Kevin mentioned, we're also very excited about the gains in Mitsubishi Tanabe, as made our colleagues there have created a phase -- a clinical trial they call the J-KINECT study, which is similar in design to the KINECT 3 trial that we ran in North America, tailored for the Japanese audience. And their study is getting underway as we speak. So very excited about the progress that they have made, and we wish them the best in their efforts.

Turning to the Tourette's syndrome program. As I have mentioned on our prior call, our analysis of the data have given us a clear path forward. It was quite evident that we needed to imply higher doses of valbenazine and we had put into the T-Force GREEN study. We've taken that data and used extensive exposure response modeling to select the doses for the next trial. We've done so, we've vetted that with our outside experts and consultants. And we've taken that final protocol and given that to the FDA for their review. And we anticipate starting the next study will be the T-Force Gold study, beginning in October and with anticipated completion around the end of 2018. Details about that protocol will be posted on clinicaltrials.gov at the time of study start, our usual practice.

We have made very good progress with opicapone, the catechol-O-methyltransferase inhibitor for Parkinson's disease. The technology transfer from BIAL, our European partner, is completing now, as we speak. And we're putting together the material for FDA review. We will send in our meeting request shortly to the FDA, and we hope to discuss the program requirements with the neurology division as soon as possible. Given the way, the FDA processes our meeting request and sets up formal meetings, we would expect them to grant a date, late in Q4 or early in Q1 of 2018 for that meeting. That'll give us the path forward for the...

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Program.

The Phase I dosing has completed in our essential tremor program. And we're now awaiting some of the ongoing preclinical work that was running in parallel to the clinical trials. These data output that is both the clinical and the preclinical will allow us later in Q3 to make some decisions about next steps for the ET program. So keep your eyes and ears open for that. And the congenital adrenal hyperplasia program with our CRF1 antagonist is nicely on track. As you are aware, we recently completed the multiple ascending dose of Phase I studies, and we are anticipating the Phase II proof of concept study in patients with congenital adrenal hyperplasia to begin actually next month, in September. A data readout would be expected in Q1 of 2018 from that proof of concept study.

Kevin mentioned that our colleagues at AbbVie are on track with elagolix NDA plans as they recently confirmed in their public comments. Information about their previously announced Phase IIIb study with elagolix, is now up on clinicaltrials.gov. This is that separate project where they're looking at high-dose elagolix in combination with low-dose add-back. Really nice for us to see is after that excellent newly Journal in Medicine Article, they had published on elagolix and the endometriosis. They have a stream of data output planned at upcoming scientific meetings. So really good progress there, and Kevin already touched on the uterine fibroid data output, later this month.

So all of the clinical stage programs are moving along very nicely. We have our preclinical pipeline. We're continuing to go well with approximately 10 programs underway. 2 of them are on later stage IND-enabling tox studies, and we hope to be able to talk about these new programs once the INDs are up and running. So good progress from the teams.

And with that, I'll turn it back to Kevin.

Thanks, Chris. So now I'd like to open it up for questions.

(Operator Instructions) And we can take our first question from Anupam Rama with JPMorgan.

Maybe a quick one from -- for Eric. Are there any trends here in -- you're seeing in the physician prescribing habits for the investigators from Kinect 3 or prior clinical trials versus a community physician, and any trends in sort of repeat prescribers?

Yes, I think. Yes, Kevin touched on that a little bit earlier in terms of not seeing a pent-up demand or a bolus, or majority of new patients coming over from clinical trials. So there's nothing that we can point to. I think that the trend is that the prescriptions are really coming from where we're focusing our call efforts. And they're in line with effort both in moving to sort of neurology as well as in community psychiatry.

And by the way, Anupam, just to be clear though. We're talking about looking that -- looking at that over all the territories, all the physicians that are prescribing. As you know, we are blind who was in the clinical trials. We're blind to the patients who are actually receiving scripts right now. So can we definitely say how many people from any trial, came up. No, we can't do that. But with what we're seeing out there, we're very confident that this doesn't have anything to do really with -- with anyone rolling from a clinical trial over.

I would just put one point on that though. Some of the psychiatrists that were -- are investigators in our clinical trial are absolutely advocates for INGREZZA and TD. And they are prescribers of the drug, and they are speaking and educating the colleagues. So that's been a good thing.

We could take our next question from Brian Skorney with Robert Baird.

Also on INGREZZA commercial launch. Understanding, it is a very early. What are your payer conversations look like in terms of how you expect coverage that certainly needs to look once you go through more formal medical review decisions. It sounds like it's going pretty well right now in terms of initial prescription coverage. But can we anticipate that the medical review decisions will look as simple as on-label approval? Or is there anything that we should be thinking about in terms of broader or more restricted coverage once we see some formulary decisions?

Yes. And our goal is to make sure that the policies that emerged from the formulary reviews are consistent with good medical practice with our labeling and with the data from our trials. And so I don't want to predict with what formulary access looks like in the future. But certainly, that's the goal for our account payer team. And what we're seeing now is that in the majority of instances where there's a prior authorization required, it simply to confirm that this is the patient with the diagnosis of tardive dyskinesia. And certainly, we've got action plans in place, where we may see some divergence from that, where we can educate the health plan or formulate decision-makers, the medical directors and so on. And we've got our colleagues from medical affairs to assist with that. But ultimately, that's the goal is to make sure that, that the access to the drug is consistent with our label and so far that's what we're seeing.

And then just -- if I could ask a follow-up. I'm just curious, given that it's early, since most of the coverage is coming from private payers right now, but I guess -- is that the case? Or you're seeing any public coverage and at the end of the day, what would you expect the private and public split to be here?

Yes, we said previously that ultimately, we expect the majority of the reimbursement to come from government pay. And I mentioned in my prepared remarks, that we're seeing coverage across both commercial as well as Medicare Part D and Medicaid plans. So we don't expect to see anything different, over time. It may shift a little bit as we sort of move to the launch. But so far coverage release across all segments of the payer landscape.

We could take our next question from Geoff Meacham with Barclays.

This is Evan on for Geoff. So with regard to the initial demand, what are -- what some other perspective you're getting from payers and what not and positions as well?

I'm not sure, I totally understand the question. In terms of payer coverage?

No, in terms of pushback from payers and any then any physician pushback that you're getting?

Well, let me take the payer piece first. Yes, I think it really is just the process of going to that formulary exceptions process that I've described. This is a new drug. They haven't had time to review it, and automatically, you have to go through a formulary exceptions process to get access to reimbursement. And so from a pushback perspective, I would say, it's the procedural steps of having to do a prior authorization, which were providing support for practices that help with that. So that, that adds time and that adds a step in the process of securing coverage for an individual patient claim.

From a physician perspective, we're not really getting what I would call pushback. We're actually seeing a lot of enthusiasm from the physicians, and I think, they're very impressed with the efficacy data that we presented. They're very interested, especially in the psychiatry space about this mechanism of action that's really new to psychiatry.

They like the fact that this is a very convenient product that has one fairly dosing without a complex titration regimen. And that it can be used safely with existing antipsychotic or other psychiatric treatment regimens of these patients are on. So we're getting a lot of enthusiasm. I wouldn't say, pushback is part of what we're hearing.

And we can take our next question from Paul Matteis with Leerink.

I want to try to -- and I know you're not getting patients on drug numbers, but I want to try to reconcile the script number reported this quarter with patient demand. My understanding is, thus far, the scripts are written for the 40 milligram dose and that the long-term dose of INGREZZA is 80 milligram. So when we think about patient demand versus the script number you're reporting today, is it reasonable to think that most patients for 1 month supply would be using 2 prescriptions today? Or is that not the right way to think about it?

Let me just clarify that for the labeling, the recommendation is that the first week is a 40 milligram capsule once a day. And then from day 8 onward, it's 80 milligrams a day. And what we're seeing is pretty consistent with that in terms of the way prescriptions are written. Does that answer your question?

Yes. Yes, it does. But logistically, if a patient gets a prescription for the drug, is there a prescription 40 mg single tablets for 1 week, and then 2 40 mg tablets for the rest of the month? And how does that work with kind of the net cost that we'll WAC versus what the true net cost is per scripts?

So you're -- I guess, I want to clarify. Are you asking if they're writing 2 separate prescriptions for that first month?

Well, sort of. If a patient is taking 80 milligram for the last 3 weeks -- months, does that require...

So I will answer that. That is one -- that would be one prescription. That first month of therapy would be one prescription. It will not count as 2 prescriptions, if you will, the first 7 days and then the following days afterwards.

Okay. And so got it. So a refill would be 60 pills and for us calculating that we would functionally double the listed WAC and price RX, is that right?

So you are correct.

Okay.

For a refill of 30 -- 30-day refill would be 60 pills, currently

Currently.

Currently, currently. And using -- if the patient is on 80 milligrams and thus receiving -- taking 2 pills of 40 milligrams every day.

Got it. So that would imply with the amount of inventory revenue in this quarter is less than $1 million. Is that a reasonable estimate?

Yes.

Okay. Thank you for clarifying that. And if I could just ask one other question on patient demand dynamics. What are you seeing in terms of demand from patients with depression versus schizophrenia? Is it -- is early demand biased towards one versus the other?

Yes, I'll take a step with that Paul. So we're seeing that the physicians and other HCPs with prescriptive authority are prescribing for the types of patients that they manage. That doesn't appear to be any particular pattern now. I can't say for certain, what the numbers are, because we don't capture that information when the prescriptions come in. But ultimately, in psychiatric settings where they treat lots of patients with schizophrenia, or schizoaffective disorder, you're going to see more prescriptions written for those kind of patients. [Conversantly] mood disorder patients are more predominant in office space psychiatry settings. And we're singing utilization there as well. So there -- doesn't that seem to be any selection of patients based on their underlying psychiatric illness. It's really based on the degree to which the HCPs, they will also identify their TD and their willingness to treat.

We can take our next question from Charles Duncan with Piper Jaffray.

I don't want to over think this and just wanted to say, really good start with the INGREZZA launch. Congrats to that. Wanted to ask you though a question regarding, if you've heard any themes from prescribers or early adopters versus non-adopters thus far and what those are, meaning, how do you plan to address those also? If you had any goals for the year that you could share with us in terms of the effective sales practices, either new prescribers or patients within a prescriber practice. Just some color around how you track beyond revenue, the effectiveness of the sales force?

Yes, it's -- Charles, it's a little early for us in terms of prescriber, nonprescriber analysis. We're still effectively 1 quarter into our launch. But that's something certainly that we're going to be doing overtime and looking at the dynamics of who has adopted, who's an early adopter and sort of why? Some of the attributes that I've mentioned earlier in my prepared remarks are really the feedback that we're getting, not only through our field sales team but also in direct interactions with customers on why they've decided to initiate treatment with TD patients in their practice.

One thing that we're encouraging a lot with our field sales team is sharing our best practices, communication, not only laterally within the sales region, but across regions. And also, communication with our national accounts team and with our medical affairs colleagues. So I think that, this is learning launch for us. We're going to be picking up on what's the best practice, what's scalable and making sure that, that we're able to replicate that on a larger scale in a compliant manner as we go forward. And that's part of what we think is going to make us successful being a rather nimble organization.

It's helpful. And then with regards to guidance. I imagine it's going to be a while, but could you see a year-end being required to gain confidence and being able to talk about guidance? Or could you perhaps talk about guidance at the beginning of this coming year?

Charles, this is DA. Thank you for the question. I think right now we are still early within the launch, this is rapidly evolving marketplace, as you know. So as soon as we're able to provide guidance, we will and until then, we'll keep considering when the right time to do so is.

And then last quick question for Chris, regarding the Tourette's plans. You've mentioned that we'll soon see that T-Force Gold kick off, I guess, in the early part of the fourth quarter. I am wondering if you could give us any color on the patient population and really what's driving the time line. It seems like end of '18 for data, is that a wild guess? Or is that just providing you ample time to get the study done in a good way.

Charles, so it is a -- it is approximately a 12- to 14-month program from initial investigator meeting, getting on the sites up and running, the recruitment, the trial, the data readout and analysis. Would we like to see it a little faster than that, that would be a good goal. But a year is for a study like this is, I think a pretty balanced position to be between the aggressive goal and the realistic one. And -- if I can move faster, I certainly will. But the population, it's we know the population -- this is pediatric population. These are 6-year-olds through 17-year-olds and the excitement and enthusiasm by the investigators to participate in this trial has been terrific. The rapid responsiveness of saying yes, sign me up and get me involved has been really good. So we're excited about the T-Force Gold. And we're actually -- and if my enthusiasm didn't come through about the exposure response analysis that we did and helping us support the doses and going forward, I would just reiterate that. It is -- it's really pretty nice data. So we're very excited about this trial.

We can take our next question from Biren Amin with Jefferies.

Maybe if I could just start on the INGREZZA launch. Can you just -- can you describe the proportion of prescriptions written in psychiatry versus neurology?

I can't give you that proportion, Biren. But I can say that -- and I've said publicly before that about 3 quarters or so of our call effort is again psychiatry versus moving to certain neurology. And in generally, we're seeing uptick across both segments.

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Consistent with the promotional effort.

Got it. At then I noticed that the ICER analysis is ongoing. Maybe if you could just describe what role the company is taking? And what you think that analysis -- and how that analysis would influence payer coverage decisions at the end of the year?

I think -- hey, Biren. Chris here. So 2 parts of your question. The first part is how the process is going and so our medical affairs team and our health economics and outcomes research group have been collaborators. ICER has offered the opportunity for sponsors to get involved and contribute data and provide feedback. And so we've been very happy with how our collaboration has been. We've stuck right in and have a lot of back-and-forth. They have their process that they go through, and they come out with their assessment. And it's a challenging role for them because normally when you want to look at what is the cost effectiveness of the treatment, you have -- sometimes you have a good data to work with, right? You understand what the disease does economically and what intervention does economically, as Kevin mentioned before, we're going into a market that didn't exist before and TD has been willfully understudied. So it's tough for ICER to get the hands on the kind of quality of life and disease-burdened kinds of impact that they would like to have. It's just doesn't currently exist. Now as far as how does that influence payers, I'll -- maybe I'll turn that to Eric because I have not seen ICER position have -- it's relatively new, and I'm not sure how much impact that has with payers at the present time, but maybe Eric can say something there.

Yes, it's hard to say. And the reason I'd say that is that ICER hasn't conducted that many assessments yet in other therapeutic areas. For the period, looking at the assessments that they've done in other areas like in multiple sclerosis, psoriasis, and someone that has had significant impact on payer dynamics. But obviously, we're going to monitor the results closely. And certainly, and this is all going on sort of in the background while we're continuing to engage directly with payers.

And the last thing, I would add is that, as Chris has said. We're providing out ICER with anything that they ask for. ICER's process is one, which they can only rely though on published data. And so there is data or work that we've done that is yet to be published is not data that they can utilize and rely on.

And then maybe if I could have a question on the pipeline, the CAH program. Chris, are you enrolling patients with CYP21A2 mutations affiliations in that trial? Or you going to evaluate based on biomarker -- enrolling based on biomarker levels. And I guess how are you looking at defining a response in that study?

Sure. Biren, so as you're aware some 95% of CAH patients have the common enzyme mutation. We are genotyping patients, but we're not requiring a specific genotype to get into the trial. They have to have CAH, and they have to have the absence of cortisol that's being treated with hydrocortisone replacement. And they have to have elevated androgens, in particular the biomarkers that we're interested in are 17-OHP and -- so that's kind of the what you need to get into that trial because what we're measuring is what changes in those biomarkers. There is no agreed-upon threshold of what's normal or abnormal in a trial like this. But there is certainly, a time-bound reduction in -- ACTH reduction in 17-OHP and androstenedione that would give us enough indication, do we have the path forward. Ultimately, what we have to continue to do is have our conversations with the FDA and see if for CAH, is this the kind of program that would be like a subpart H, where you could use those well accepted laboratory tests to get a drug approved because that's what clinicians used to manage their patients, or do you have to show some longer-term clinical impact of the disease that may be able to trick you to measure for which there isn't really clear regulatory precedent. So we're -- our discussions to date and our plan is that we are using the laboratory parameters as the primary end points of these studies.

We can take our next question from Ian Somaiya with BMO Capital.

A couple of question on INGREZZA. First, I was hoping you could speak to compliance. Just what are you seeing from a patient compliance standpoint? And what, if anything, are you doing to ensure compliance going forward? I know that's been obviously one area of concern given the background disease of patient population?

So we're not going to get into the detailed metrics. But I can tell you that from a compliance perspective, it's as we expected. I mean, it's very early stage, and we're still getting lots of new patient starts at this point. And I'm sorry. Can you give me the second part of your question?

Well, I mean, the separate question I have for you, the other part of the question was what are you doing in terms of whether it's patient assistance, physician assistance to ensure that patients remain compliant in the future?

Yes. So I can describe our program a little bit, and I think that will help. We -- obviously, it's very early in the launch. There's a lot of focus on securing reimbursement for new patient starts. But one element that we offer through our INBRACE program is access to psychiatric nurse. So after a patient enrolls in the program, they get a phone call from the psychiatric nurse welcoming them, educating them a little about TD and about INGREZZA and helping them to understand what to expect with treatment. We do a follow-up call a couple of months after they've initiated the treatment to continue to assess how they're doing, answer any questions they might have, et cetera. So that, I think, helps -- could help with compliance. So it's a little bit early to make that determination. The other thing I'll mention is that it's not just the INBRACE team that's contacting the patients. It's the specialty pharmacies. Each month when -- before their month's supply runs out, they're going to get a phone call, asking if they -- where they would like to have their next month shipment sent, and this is a phone call from a pharmacist. So between the contact from the specialty pharmacies and the outbound contact from the INBRACE program, those are elements that can help with keeping patients that are doing well on therapy -- on their therapy. But like I said, it's awful early yet to make any comments or speculate about compliance.

Okay. And one other question I had was just on your marketing efforts, outreach to physicians. Can you just -- maybe just speak to the number of your target physicians that you have had conversations with, just overall awareness of the therapy? And are you attributing -- how much of the initial sales are you attributing to just conversion of these, from conversations to writing a prescription?

Okay. So we said publicly that we have a target universe of approximately 10,000. About 3/4 of those HCPs are in psychiatry. I think I mentioned in my remarks that we've visited virtually all of our targets by now. And many of them, we've seen multiple times. Our field sales team has been active in terms of cleaning up their target list, meaning they've been adding physicians. We have also been adding mid-level providers that weren't in our target list, such as nurse practitioners and physician assistants, both in psychiatry and in neurology. So how much of the initial prescribing is due to those initial context? Hard to say. We didn't have any kind of awareness campaign for INGREZZA before it launched. There weren't coming-soon ads or anything like that. And so in many instances, before it was approved, many of our current customers hadn't heard of INGREZZA. So I would have to attribute the majority of these prescriptions to those initial efforts.

And we can take our next question from Tazeen Ahmad with Bank of America.

I just wanted to get a sense of how you're thinking about metrics going forward. So you've already said that, for now, you're not providing sales guidance, and scripts are obviously being blocked. Are you considering maybe providing additional metrics for the next few quarters as we try to get a better sense for how the model uptake initially? And then you've talked a little bit about the profile of the patient pool that you have. But I'm curious to know, for doctors who have prescribed INGREZZA, has your sales force found that they were already familiar with the drug before having had that point of contact with the sales rep?

And then maybe a last question for opicapone. You talked about putting together -- preparing, rather, for an FDA meeting. Given some events that have happened with FDA recently where they've had early responses to PDUFAs and some cases, some companies have -- no longer have to do certain trials, how are you feeling about the potential of not having to do a study to get...

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You want to add anything, Dave?

And it's DA. Just wanted to add. You mentioned that we were blocking scripts. What's happening is it's not that we're interfering with IMS, for example, or as we said beforehand, working through a select group of pharmacies. This isn't your typical drug that is sold at Walgreens, and then the Walgreens reports the numbers to IMS. We're not going through that system. We're going through our select pharmacy network. And as such, that data is not making it to the typical sources where IMS or Symphony might pick up the data.

And Eric, you want to...

Yes. I think the second part of your question was around awareness of INGREZZA prior to launch and to the extent that, that was driving early uptake. Obviously, some awareness in thought-leader communities and psychiatry and neurology. Some awareness amongst investigators, obviously. But the majority of our target audience were not aware of INGREZZA before it got approved. Our efforts in the year leading up to launch were really around TD education, and we had a TD campaign that we launched and a lot of activity and medical meetings and so on with publications to help support all that. So we chose to focus on developing TD market versus sort of a brand-awareness approach, and then we kind of flipped a little bit when we got to launch. And we've been focusing a lot, obviously, on raising awareness of INGREZZA.

We're in the process of doing some market research, and we'll be tracking that over time. But at this early stage, I can say pretty confidently that most of the physicians that we've been calling on and have started to adopt INGREZZA were not familiar with it prior to the salesperson walking in the door of their practice.

And then with respect to opicapone, Tazeen, the neurology division is a hard-working division at the FDA, and there have been some high-profile early approvals. But the majority of files that are NDAs that are under review are really struggling with the hard -- the heavy workload that the FDA is trying to process. And until we sit down with them and meet with them, we won't know what the time lines are. Obviously, we will share that once we have meeting, minutes from that meeting. But our expectation is we plan for the best, and we expect challenges. So we have 2 very different scenarios. One is no additional trials are needed. We can file with the existing data package that they all had so nicely assembled. The other extreme is you have to do a full Phase III North American trial to show what North American Parkinson patients look like in the hands of North American investigators. And until I have that meeting, I won't know. They -- the FDA is not familiar in detail with opicapone. This was a drug that was developed outside of the U.S., so we have a lot of -- we have to bring them up to speed on this program. And I really can't speculate where they're going to be.

Okay. And maybe just a follow-up, DA. Thanks for clarifying the point on scripts. When do you think you'd be in a position to wrap up, getting the right group of specialty pharmacies? Could it be in this quarter?

So we already have a -- obviously, the -- our initial group of pharmacies, we're happy with them. Obviously, over time, as things evolve, we may decide to expand that network. But that's really -- it's going to be an operational decision as things move on. Ultimately, what we're trying to do is to, as we've stated, help get as many patients access to INGREZZA as possible.

And we can take our next question from Andrew Peters with Deutsche Bank.

Thanks for squeezing me in, and congrats on a nice launch. A couple of final questions on INGREZZA, if you don't mind. I guess the first one, in terms of the initial prior authorizations, have you experienced many rejections or kind of failure to files? And if so, has it been around confirmation of diagnosis? Or have there been other reasons? And then just what has typically been the time course between first script and ultimate patient fill? Just trying to understand kind of how long that prior authorization process has worked.

Yes. So Andrew, it's Eric. We said that we weren't going to get into the metrics. But overall, I've been pleased with the conversion rate from prescriptions being written to product being filled. I think that the timing of how long it takes to really -- that cycle time from the treatment form coming in till the product's dispensed, it can take anywhere from days to several weeks. And it really depends on the patient, the physician and on the health plan.

You may remember in my prepared remarks, I talked about the formulary exceptions process, and that involves some back and forth. When you do the benefits investigation and discover there's a prior authorization required, then we -- our system sends that PA form to the physician to complete. So it's dependent on them completing it in a timely manner and getting that submitted into the insurance company.

On the other end, once we have confirmation of our reimbursement from the health plan and the pharmacy now have to reach out to the patient and contact them and say, "Where would you like your INGREZZA shipped?" Sometimes they don't answer the phone, so it may take multiple attempts in some instances to track down the patient. So that's why I'm saying, there's a sort of a range of timing from days to several weeks, just depending on how all the parties interact in that process. Did that answer your question?

It does. And then I guess just a quick follow-up. In terms of -- I don't know if you even track these metrics. But -- of the patients on drug so far, do you have a sense of how many of them have been on prior treatment for TD with off-label tetrabenazine, for example. Or do you have a sense there?

Yes. We have no way of knowing.

I could tell you, just the clinical universe is overwhelming, and most of them have never even sniffed a VMAT2 inhibitor.

So we know from looking at prescription data, if there would be a patient, it would be most likely a patient that's treated by a neurologist. As we mentioned, most of our calls are going to the psychiatrist.

I will qualify my comment, Andrew, that in psychiatry, generally speaking, there's very low awareness of tetrabenazine. In fact, part of educational opportunity that we have is to -- with valbenazine and INGREZZA is to orient them to VMAT2 as a mechanism to treat TD. So I guess we don't have any data, but Chris mentioned it's bound to be very low.

We can take our next question from Geoff Meacham with Barclays.

Just on the -- Chris, I wanted to ask you on the recent -- or the most recent question on tetrabenazine. Just today's publication on comparing valbenazine and tetrabenazine, we get your perspective on that? Do you think this explains some of the baggage with tetrabenazine from a safety perspective? And then does this have any implications, kind of with how you think about the clinical programs going forward or -- I don't know, things like IP? I'm just trying to figure out how you can best use this publication today.

Geoff, the publication came out was actually just published today in Drugs in R&D. We had an opportunity to answer a question that's puzzled us for a long time. As you know, tetrabenazine has been called a VMAT2 inhibitor. But we knew that there are 4 metabolites from tetrabenazine, and they have different kinds of pharmacology. They bind a variety of other receptors, postsynaptic dopamine receptors, serotonin receptors, not just VMAT2 transporter. And so -- but nobody really understood what that was like because we had no assay for measuring those metabolites. So we put one in place, and we measured plasma concentrations of metabolites in patients who were taking tetrabenazine as a therapy. And shocking to us was that the patients have almost no exposure to the active metabolite that valbenazine makes. So the so-called (+)alpha-dihydrotetrabenazine, which is made from valbenazine, is almost nonexistent in patients taking tetrabenazine, whereas those patients have primarily (-)alpha-dihydrotetrabenazine and (+)beta-dihydrotetrabenazine, so minus alpha and plus beta. What's interesting about that, plus beta is a VMAT2 inhibitor, slightly less potent than plus alpha. And minus alpha is a D2 antagonist, binds with D2, D3, 5-HT7 and is much less potent a VMAT2. So what you're getting is kind of a different metabolite profile that potentially does explain why maybe there are differences between tetrabenazine and valbenazine in terms of safety and efficacy profiles. So we think this is just an interesting first observation, and a lot more additional work should be done. And any drugs, going forward, that attempt to work through VMAT2 as a therapeutic mechanism should be able to measure these metabolites and see whether they are important implications for safety efficacy profile.

Yes. I would just like to add to that this new paper, it took years of work to be able to develop the kind of assays to be able, both in animals and in human sera, to, for the first time, really be able to discern all of the metabolites, major metabolites of tetrabenazine. And just to follow up with what Chris said, it was very much of a surprise to us to see that valbenazine's active metabolite is virtually nonexistent when you...

They're 2 different drugs.

They are 2 completely different drugs.

We can take our next question from Phil Nadeau with Cowen and Company.

Congratulations on the launch. I guess first question is on T-Force Gold. Is that trial likely to serve as the first pivotal for Tourette's? Or at least a support (inaudible) Phase II?

From your lips, I got here is -- I would -- it's called a Phase II B trial because I believe that Phase III trial should be confirmatory, not exploratory in that sense. And so we are taking some new doses into kids that we haven't studied before, and so it's a Phase IIb trial. Now if the trial were spectacularly successful in terms of efficacy and safety, would I sit down with the FDA and see if that could serve as one of the adequate -- one adequate and well-controlled trial? And if so, what, if anything, else would be necessary to submit an NDA? So obviously, I'd love to be in that position when that trial leads out, to have great data results and to ask that question to the FDA. But it's called a Phase IIb study. We'll see how the data read out.

It's much, Philip, that I think what you're hearing from us is how we did the TD program, actually with Kinect 3 and that with a Kinect 4. But remember those agreements, Kinect 3 being one of the 2 pivotals came late after discussions with the FDA. You need data before you can have discussions.

Got it. And is it fair to assume that you'll need 2 pivotals?

I don't know the answer to that question because here's a drug that's approved and on the market. We have a lot of safety information about the drug. Is one pivotal plus some long-term safety data sufficient? I don't know. We'll have that discussion with the...

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Okay. And then same question. Kevin, in your prepared remarks you mentioned that you didn't think there was any bolus patients. I'm curious, why that is, like why you feel like you have information to say that with such certainty. Is it because - I guess basically, do you know that the patients that you have weren't, in any way, put on a waiting list, that the physicians weren't assembling these patients? I know you said most of the people in your prescriber base were unaware of INGREZZA before it was launched. But it does seem like if you just had a few high prescribers in there, there could be a little bit of bolus effect.

Yes. And Phil, what you described in your question is actually what the case is. It's not that there's a few high prescribers that are doing this, and it's not that -- this is -- this really is kind of the tip of the iceberg. This really is what you're seeing as a broad prescribing pattern. And there's no concentration by physician, by physician type, by region that's taking place here. So that's what leads to my statement that there's nothing here that would suggest that there was a warehousing in any place for these patients or an anticipation of the launch of this drug.

Great. And then just last, a follow-up on Paul's question earlier. He suggested $1 million, and inventory was really about the contribution to revenue this quarter, so that means $5.3 million in end user demand. Are you comfortable with that?

I think what -- the way I understood it was we've guided, right, I stated that there was less -- that typically, they held on to less than 1 week of inventory. So if you look at the number of weeks in July, you can back into that number. And if it's less than a week, then it's probably less than $1 million.

We can take our final question from Jay Olson with Oppenheimer.

Had a couple of quick ones. You've mentioned that the INGREZZA coverage that you've seen has been consistent with the label. And since the label does include a broad indication for all patients with tardive dyskinesia, does that mean that you're not seeing access restricted by severity of disease?

Generally, no.

Okay. And then the second question I had was just around -- is there anything you can tell us around potential future indications that you might pursue for INGREZZA beyond Tourette's syndrome?

Jay, we, probably for competitive reasons, wouldn't want to have a discussion about that.

And I'll turn the program back over to Kevin Gorman for any closing comments.

Thank you very much. I really appreciate everyone. We've done quite a bit over. But again, this has been a tremendous quarter for us. We're -- as I've said before, we're very pleased with the launch and the continued strong uptake that we're seeing. However, I -- as you all know, I'm a bit cautionary and conservative. It's still very early days. We do anticipate having a competitor on the market, perhaps even as early next month. So let's keep our heads down. We're going to keep working...

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And as time goes on, as each quarter, we're going to be updating you as we go along.

But in closing, I really would like to thank the outstanding work that's been done by our medical affairs group over the past 2 years that they've been in the field and been an important resource for the medical community with disease education, and they've been a wonderfully, valuable resource for their other colleagues in the field, particularly the national accounts executives who've been working with the payers. And that national accounts team has done a remarkable job, working with the payer community to introduce Neurocrine and to explain the value that Neurocrine brings to patients and their caregivers.

And finally, but certainly not least, the outstanding job of the sales force it has done, and truly collaborating with psychiatrists and neurologists to bring INGREZZA to their patients. And I think, really, part of that goes to just the quality of individuals that we hired. And as we've said before, an unusual situation here in the early days, they're not being -- the majority of their compensation, actually, does not have anything to with script volume. It really has to do with living the values and the collaboration with one another and what Neurocrine stands for, and that is really focused on patients. And that truly has led to the success that we're seeing right now. So a very strong thank you to them.

So with that, I'll bring this to an end, and I look forward to meeting and talking with you all in the upcoming conference season. Take care.

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