Neurocrine Biosciences Inc (NBIX) 2017 Q4 法說會逐字稿

Good day, everyone, and welcome to Neurocrine Biosciences Reports Fourth quarter and Year-end 2017 Results. (Operator Instructions) Please note today's call is being recorded. (Operator Instructions)

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

Thank you very much, and welcome, everyone, to our fourth quarter earnings call. Today, I'm joined by Matt Abernethy, our Chief Financial Officer; Eiry Roberts, our Chief Medical Officer; Eric Benevich, our Chief Commercial Officer; and Chris O'Brien, our special consultant to Neurocrine.

Before we get going, I'll have Jane Sorensen read our safe harbor statement. Jane?

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 very much, Jane. 2017 is -- as most of you know, is a very special year for Neurocrine. The obvious headline was the approval of INGREZZA. And INGREZZA was approved with an excellent label that reflected all the important attributes of the drug based upon a thorough clinical trials program that we had done. This great label, along with outstanding work from our clinical affairs, our clinical team and regulatory and also the commercial team, led to a year that we did not imagine. It allowed us to bring this drug to many more patients than -- in such a short period of time than we had planned for.

In addition to that, we have been able to push forward in 2017 a number of our clinical and preclinical programs. And so what you're going to hear from us today is going to be an update on our financial performance in 2017 from Matt; also, an update from Eric on the continuing progress that is being made commercially with INGREZZA; and then Eiry and Chris will go over our R&D programs and bring you up to speed on those.

So what I'd like to do now is turn it over to Matt.

Good afternoon. Thank you for joining our call today, and I'm glad to be participating in my first call as part of the Neurocrine team.

During the fourth quarter of 2017, INGREZZA continued to show strong month-over-month prescription growth, resulting in $64.5 million in net product revenue with approximately 9,100 scripts filled. This compares to third quarter 2017 net product revenue of $45.8 million with approximately 5,100 total prescriptions filled. Net product sales during the fourth quarter were above our expectations, largely due to high script volume, which increased by approximately 80% over the previous period. But we also benefited from the slower-than-anticipated transition from the higher-priced, 2 40-milligram capsules per day to the 1 80-milligram capsule per day. Importantly, the transition from the 2 40-milligram capsules to 1 80-milligram capsule was largely complete as we exited the quarter.

Total company revenues for the fourth quarter were $94.5 million, inclusive of a $30 million milestone payment received from AbbVie for the FDA's acceptance of the elagolix endometriosis NDA filing in the fourth quarter.

For the year ended December 31, 2017, net product sales of INGREZZA were $116.6 million, and total company revenues were $161.6 million, inclusive of $45 million of revenue recognized from our collaboration agreements with AbbVie and Mitsubishi Tanabe Pharma Corporation.

Net income for the quarter was $6.9 million or $0.07 per diluted share compared to a net loss of $44.7 million or $0.51 loss per share for the same period in 2016. The gain for the quarter was largely driven by the $30 million AbbVie milestone received and also net product -- growing net product sales. For the year ended December 31, 2017, the company reported a net loss of $142.5 million or $1.62 loss per share as compared to a net loss of $141.1 million or $1.63 loss per share for 2016.

Research and development expenses were $25.6 million during the fourth quarter of 2017 compared to $22.6 million during the fourth quarter of 2016. The increase in R&D expense is principally due to increased program activity in R&D. For the year ended December 31, 2017, R&D expenses were $121.8 million compared to $94.3 million for the same period in 2016. The increase is primarily due to a $30 million exclusive licensing agreement to BIAL in the first quarter of 2017, which was expensed as in-process R&D.

Sales, general and administrative expenses increased to $56.3 million for the fourth quarter of 2017 from $23.7 million for the fourth quarter of 2016. For the year ended December 31, 2017, SG&A expenses were $169.9 million compared to $68.1 million for the same period in 2016. The increase in SG&A expense across both periods is primarily due to commercialization activities for INGREZZA, including the hiring of our sales force.

Our cash, investment and receivables position as of December 31, 2017, was nearly $800 million, positioning us well to execute our near-term company strategy.

Now looking ahead to 2018. We remain encouraged by the initial results of the INGREZZA launch and the positive clinical feedback received by our customers. We are still early in our launch cycle and do not plan to provide formal net product sales guidance for INGREZZA at this time. Revenue milestones under the AbbVie agreement for 2018 are expected to be $40 million, contingent on an FDA approval of elagolix for endometriosis in Q2.

Regarding operating expenses for 2018. We expect ongoing operating expenses to be approximately $365 million to $395 million. Key investments will be directed toward: Number one, our sales and marketing organization to maximize the potential of INGREZZA by enhancing disease state awareness; and number two, internal R&D to meaningfully advance our programs in Tourette syndrome, opicapone for Parkinson's disease, congenital adrenal hyperplasia and post-marketing studies of INGREZZA for tardive dyskinesia. In addition to these programs, we also intend to file one IND in 2018, which we will provide further insight to when the timing is right.

We look forward to another year of tremendous commercial and clinical development progress.

With that, I will now hand the call over to our Chief Commercial Officer, Eric Benevich, who'll provide a commercial update.

Thanks, Matt. Our commercial team is very excited about how our launch has gone so far and very energized about our prospects in 2018. As noted earlier, we ended the year strong with approximately $65 million in Q4 net product sales and approximately $117 million net for the 8 months since we launched last May. We saw strong month-over-month and quarter-over-quarter prescription growth.

We are still very early in our launch and are building an entirely new market for tardive dyskinesia. Our focus has been to increase awareness, recognition, diagnosis and treatment of TD. Many patients who have TD are currently undiagnosed for a variety of reasons. There were no approved medications to treat patients with TD prior to INGREZZA. But now with INGREZZA, the first FDA-approved drug for TD, we remain focused on growing the market and committed to driving disease state awareness to health care providers and patients in order to help as many patients as possible.

Our breakthrough product, INGREZZA, is very attractive to HCPs who are taking care of patients with TD, both in terms of its label and clinical product profile. INGREZZA's rapid and robust efficacy, simple once-daily dosing and compatibility with common psychiatric treatment regimens as well as tolerability profile, no-box warning or any contraindications are all product attributes that support the rapid uptake that we have seen since launch.

As Matt previously stated, we have substantially completed the transition to our 80-milligram capsule. The full pricing impact from this transition, which is approximately 40% less than 2 40-milligram capsules, will be felt in Q1. In addition, we will be experiencing pay-related impacts to our gross-to-net further first time in Q1, including the reset of the donut hole contribution for Medicare Part D patients and reset of annual out-of-pocket co-pay contributions for commercial patients. The combined effect of these pay-related market factors will impact our gross-to-net. However, since this is the first time we are going through a Q1, it is challenging to model the impact.

Regardless of these Q1-specific dynamics, we expect to see continued strong demand reflected in prescription growth as we move into and through 2018. We are seeing early adopters expand their use of INGREZZA, and additional health care providers are now gaining their initial experience.

We are very pleased with the early feedback from these -- from those with clinical experience. Essentially, we are hearing that INGREZZA is a drug that performs in the real world as it did in clinical trials. And we are hearing many impactful stories of patients experiencing meaningful benefits from treatment with INGREZZA. This feedback is very gratifying to all our employees who worked so hard to discover, develop and launch INGREZZA.

So in summary, we are pleased with our early-launch success. We realize there are many thousands more TD patients out there that can benefit from INGREZZA treatment, and we are committed to our mission of delivering hope to all those patients.

So with that, I'll turn it over to Kevin.

Thank you, Eric. Thank you, Matt. So as you can see, we're in a real good financial position, and commercially, we remain very pleased with the launch of INGREZZA. And I think, as Matt had pointed out and Eric has given a little more detail to, is that the next best dollar that can be spent at Neurocrine is on the commercial success of INGREZZA.

And now let's go to what -- the other focus of Neurocrine, which is our pipeline. And to that, I'm going to turn it over to Chris and Eiry. Chris, you want to start up?

Yes. Thanks, Kevin, and thanks to those joining the call this afternoon. It's really with great pleasure that I get to welcome Dr. Roberts to Neurocrine. She has a unique set of skills, which will really help expand our pipeline and continue the successes we have enjoyed in recent years. As a physician with training in cardiology, immunology and neuroscience, she has helped bring over 100 molecules from the lab into the clinic. She has had an opportunity to lead both large and small discovery and development efforts, and her personality is a great fit with the Neurocrine team. I am very pleased to turn over the role that I've had as Chief Medical Officer over the last 12 years to Eiry, who will provide an update to our clinical programs for congenital adrenal hyperplasia and opicapone after I provide the update on our INGREZZA valbenazine programs.

Let's start off with an update on valbenazine for Tourette syndrome. The T-Force GOLD study is well underway. Recruitment is on track with our goal of recruiting 120 pediatric patients at multiple sites around the U.S. We are very pleased with the conduct of the study and the support we're getting from investigators, families and the Tourette Association of America. We still anticipate top line data at the end of this year, but also, we'll have -- or they'll have more clarity on timing as we randomize the last subject in the second half of this year.

Neurocrine also continues to conduct a variety of Phase I and Phase IV studies with INGREZZA for tardive dyskinesia. This includes the so-called post-approval commitment studies, such as pharmacokinetics in patients with neural impairment. We are also planning a Phase IV study to see about the factors which may be associated with the INGREZZA-induced clinical remission of tardive dyskinesia. Our medical affairs group also continues to receive requests to support exploratory clinical trial using INGREZZA in the hands of independent investigators.

At this point, I'd like to turn this back over to Eiry, and she'll give an update on our other clinical development program.

Eiry?

Well, thank you, Chris, and I'm delighted to be here as part of the Neurocrine team and to be able to provide an update on our clinical development programs for congenital adrenal hyperplasia and Parkinson's disease.

The proof-of-concept study for adults with CAH is currently underway here in the U.S., with patient screening ongoing at a number of academic centers of excellence. We anticipate top line data from this study later in Q2 of this year. And with those data in hand, we would plan to meet with the FDA to determine next steps for the pediatric trial and for the overall development program sometime in the second half of 2018.

Turning to opicapone for Parkinson's disease. As planned, we met with the Neurology division of the FDA in January to discuss the next steps for this program, including whether another Phase III trial would be necessary ahead of filing an NDA. We will not comment on the discussions with the FDA until we receive the meeting minutes. The company has, however, provided previous guidance on a base expectation that a Phase III study may be required, and we've been planning accordingly. If it is determined that a Phase III study is not required, we still have a tremendous amount of work ahead to compile the required data for an FDA filing, which would likely take our filing date into 2019. We will report the outcome of the meeting with the FDA later this month once we receive the official meeting minutes.

As part of our planned NDA submission, we have identified the need for some additional Phase I data to round out the data package for opicapone and meet U.S. regulatory requirements. These studies have been initiated, and they're on track to be part of the NDA submission.

With that, I'll hand it back over to Chris. Thanks, Chris.

Thank you, Eiry. Just a few closing thoughts. 2018 is a year of great opportunity with these programs that are currently in place at Neurocrine, and Eiry and the entire clinical and Neurocrine team are really up for the challenge.

In closing, from my end, I wanted to just say what an honor it has been to be part of this company and to see its growth and its success, and I look forward to continuing on as an adviser. We'll be looking closely with some of the Neurocrine colleagues to see about continued opportunities to enhance our pipeline internally.

So with that, I'll turn it back over to Kevin. Thanks very much.

Thank you very much, Chris. And I think, as all of you can -- know that Chris has been an integral part of Neurocrine's success. We'd never be here without Chris and also without Tim. But things change, and we do have now Matt and we have Eiry onboard, and you're going to be hearing a lot from them in the future. But as you've also caught from Chris there, he's not fading off into the sunset. We'll be very much in touch with Chris, and he will be continuing to work with us in moving Neurocrine forward for years to come. So this is not a goodbye.

A couple of things just before I turn it over for questions. AbbVie has been doing a great job with the elagolix program and moving it along at all fronts. We anticipate that this quarter, Q1 '18, AbbVie will be reporting top line data on each of the 2 Phase III clinical trials in uterine fibroids. Also, the PDUFA date for elagolix in endometriosis is next quarter Q2. So we look forward to that. I'm sure many of you have seen a number of advertisements that have taken place on television, in print, on radio, bringing up awareness of endometriosis that has been sponsored by AbbVie. And I think that, that is a very important and responsible activities that they've undertaken well in advance of the launch of this drug. It is a disease that is -- that hits women in the prime of their life in their 20s and their 30s, can last all the way through menopause. And it is one that affects nearly 7.5 million women in the United States, and yet it is one that has not received the attention that it deserves out there. So I think their campaign in bringing it to the forefront of physicians and to the women and their loved ones who suffer from this is very important.

So with that, I'm going to open it up for your questions.

(Operator Instructions) Our first question comes from Geoff Meacham with Barclays.

I have one commercial and one clinical. For INGREZZA, can you talk about persistence trends? I know it's obviously pretty early in the launch, but has there been much discernible with respect to whether there is a drug holiday, and when it, if it is, if it clusters? And do background meds or baseline TD matter? And then I'll follow up.

Yes. Jeff, with regards to persistence, it is early in the launch. And we haven't seen any pattern like you've talked about with regards to drug holidays or any inconsistencies there. We -- it's awful early yet. And for us to have a good feel for how things are going to be in the long run, I think we need a little bit more time.

Okay. And Chris, sorry to see you go. Good luck in your next endeavor.

Thank you. It's a retirement.

I know you'll be bored, though, I think pretty soon.

We'll keep him busy.

When you think about the Tourette's, I guess, the design of the study and the potential outcomes, what are the -- I know you've been asked a lot about the regulatory and the fileability. I mean, do you feel like the -- what you have in front of you in terms of T-Force is enough, I think, for registration? Or is it -- do you feel like you're just still in the dose sort of finding mode? I know you've been asked that a million times; I just wanted to get maybe an updated view.

Yes. My perspective is that we designed a study that is a very robust, high-quality study that could stand as a registration trial. But obviously, it depends on the results of the study and a conversation that we would have to with the FDA. Until I have that data and -- well, until Eiry has that data in hand, she would -- and sit down with the psychiatry division and decide -- works out the next steps, it's really premature to say how they're going to think about it. But clearly, the study is designed to be a robust study for both efficacy and safety. And with respect to the comment about dose-finding, well, yes, in the sense that we're exploring higher doses in this trial that had previously not been used in the placebo-controlled Tourette study. But those doses were selected based on very careful exposure-response modeling. So to the extent that we think these are the right doses, I'm quite comfortable with that. And obviously, the study was designed with that concept in mind that these are the right doses, that additional exploratory work would not be necessary, and this is meant to just confirm that.

Our next question comes from Tazeen Ahmad with Bank of America.

A couple on INGREZZA. Can you tell us what initial feedback you're getting from physicians on the switch to the 80-mg dose? Is that being viewed as the preferred option by most physicians? Or are there still some docs who might prefer the 2 40-mg per day dose? And then I have a follow-up.

Yes, actually, not a lot of feedback with regards to going from 2 by 40s to the 1 by 80 in the sense that most physicians recognize that they're the same from a bioequivalence perspective. The message to the physicians is now it's 1 capsule once a day, which is even more convenient than previous. So for them, it's a relatively transparent process for patients that are already on INGREZZA and being maintained on 2 40-milligram capsules once a day. Essentially, when they were due for a refill, that's when that switch happened. And then, of course, for new patients, they're getting on to the 1 by 80 capsule after the first week. So it's been a smooth process from that perspective.

Okay. And as far as your sales force, do you feel like you rightsized your -- and it's early in the launch, and obviously you're still trying to figure out the market opportunity, but do you anticipate adding more sales reps as this launch progresses this year?

Yes, we feel good about the sales force size and structure that we've put up for launch. And obviously, the results that we've had so far, I think, speak testament to the quality of the team that we've hired. We're going to continue to look at the market dynamics and understand everything that we need to do to optimize INGREZZA and invest appropriately. And if that means potentially making some changes downstream, especially as we prepare for adding new products and new indications, then we'll certainly do so. But for now we feel like we're in a good place in terms of our sales force.

Our next question comes from Anupam Rama with JPMorgan.

For the CAH program update in the first half of '18, can you just remind us how 74788 is different than the first-generation compound? And kind of walk us through what a win scenario would be here for the first half '18 update.

Yes. So this is Kevin. The main thing that it's different on, and (inaudible) if you recall, and I'm taking this question because of all the historical context that comes into here. And the first compound, we put a single dose into the clinic, if you recall, in that handful of patients that we treated. They were all adults. And we had a significant impact just with one dose on their endocrine profile. As we were then moving that into the clinic into a multi-dose in adults and then one going to the single dose in the children, we were out running our preclinical program. And we have an ongoing long-term juvenile preclinical tox study that took place and then read out. And there, we saw a tox signal that had never been seen before with adult animals. That's when we decided to stop, look back, see if we could understand this tox signal and then determine, was it drug-related, meaning compound-specific? Was it a species-related phenomenon? Or was it mechanistic? We went into our library of CRF antagonists, which is pretty vast because we've been in this field for about 24 years with CRF antagonists. And what we found was that, indeed, it was just compound-specific. So we had taken another one of our backup compounds, put it through that very same model of the juvenile tox, long-term juvenile tox. It was clean, that is the compound now that is in the clinic.

Got it. And I'm thinking about the first half '18 update. What do you -- how should we be thinking about a win scenario there?

Yes. I think a win scenario there is going to be one where we see a lowering of androstenedione and [fixed] hydroxy-progesterone levels in those patients, much like what we looked for in that very first single-dose study that we did previously. You have anything to add (inaudible)?

All I would add is that this is a multiple-dosing study in adults, and we've completed a single-dose study with this compound in healthy subjects last year. And to Kevin's point, the primary endpoints of this study is the 17-hydroxy-Progesterone. Also, we're measuring ACTH levels. And if we see what we anticipate could be a clinically meaningful change in those biomarkers in this study, then we would take that data to the agency and discuss with them the potential path forward for the molecule in treatment of children, potentially also on adult.

We'll go next to Paul Matteis with Leerink.

This is Jeffrey Lin, on for Paul Matteis. So I guess, the first question is, with a couple of quarters' update of data on hand, do you happen to have a snapshot of the patient mix for INGREZZA? Like what percent have mood disorders versus what percent have schizophrenia?

Yes. We actually -- we don't capture that data through our prescription fulfillment process. However, anecdotally, what we're hearing from the physicians is that they're treating whoever they see with TD, regardless of what their underlying psychiatric condition. So it appears that, in general, the patient mix is probably not too dissimilar from our clinical trials. But certainly, I think it's a function of the type of practice that the physician has, whether they're a movement disorder neurologist or a psychiatrist.

Okay. And I know you're not giving product guidance into 2018, but perhaps you can give us some insight as like what other, I guess, recency in these launches have may -- have you looked at to sort of gauge your internal assumptions for the Q1 impact?

Go ahead, Matt.

Yes. Obviously, we're still really early in our launch of this product, and we're going to continue to assess when we'd feel comfortable to be able to come out from a guidance perspective. So for example, items that we're looking into, number one is payer mix. We continue to shift on the payer mix side from quarter-to-quarter. And then the second piece, which was one of the first questions asked, was in regards to persistence. Now that's a huge aspect to what your revenue assumptions would be to be able to build out a more formal trajectory from the lens of guidance and then the overall market, patient potential, and Eric can add some more commentary here.

Oh, there's not much to add. I mean, it's still very early in the launch, and we're going through Q1 for the first time. And just as you asked about are there any good analogues, we've been trying to see if there's anything out there that is -- would be helpful for us as we try and predict what the future looks like. But for the most part, this is about just going through the quarter, seeing where we're at in terms of these variables that Matt talked about with the payer mix, understanding what patient persistence looks like and continued strong demand for the product. And we'll be able to give guidance further out in the future when we have a bigger data set to look at.

Okay, great. And then, finally, on the CAH programs, sort of along the same lines that was asked. I guess, sort of asked differently is, with the data that should come out with the first half '18, how should we be thinking about the data in the context of the disease?

So I think, as I mentioned a little earlier, the biomarkers that we're looking at in the context of this POC, proof-of-concept, study are core to the disease mechanism and to the downstream long-term clinical impact that is associated with this disorder. And so they're very relevant in the context of measuring the disease itself. So what we need to do, though, in -- once we have access to those data is understand with the regulatory agencies what their expectations would be in terms of the relevance of those data relative to other clinical data that they might be interested in, in that patient population. And the first step towards doing that is obviously completing this POC study and engaging in an initial interaction with the agency.

Our next question comes from Brian Skorney with Robert W. Baird.

I guess, when we're just going to think about your base case scenario for opicapone, there's -- that you want to do another study or do another study prior to approval, I mean, how should we think about the context of what the study would look like? I mean, are we thinking of just a U.S. version of BIPARK-I or -II? Would it be placebo-controlled? Would Comtan be an appropriate comparator here? And in terms of end point, do you think that would also be consistent, something like [lofton], over a 3- or 4-month period?

I think we believe that the study would be similar to a placebo-controlled study outside the United States that was part of the BIAL application. We do not believe we would need to include a -- an active comparator in the study. And the endpoints that you mentioned are consistent with those measured in the European setting. The endpoints that we believe are most relevant to the patient in this setting are off time and a reduction in off time, together with the potential to improve the amount of time with troublesome dyskinesia associated with levodopa treatment. And so it would be very consistent and would just be a case of generating U.S.-level data to support the NDA if the agency required that, and that has been our base case scenario that we've worked on the -- prior to going to the FDA.

And if I can just ask a follow-up. I just wondered if you have any concept of where AbbVie is with regards to elagolix as it pertains to European approval.

Yes. Actually, AbbVie has not shared any concrete plans with us over in Europe. Any work that they're doing there, we're not aware of. So that'd probably be a more appropriate question for AbbVie.

We'll go next to Phil Nadeau with Cowen and Company.

Congratulations on the progress, especially with INGREZZA. One question on the INGREZZA trends in Q4. Can you just talk a bit about how the rate of new patient starts compared Q4 versus Q3? Based on our model, it looks like it may have been somewhat fewer new patient starts per month in Q4 versus Q3. But there's just so many unknowns, it's really hard to have any confidence in what the model says.

Yes, and we've previously shared TRx numbers. And we've stated that we're very pleased with the demand that we've seen throughout the launch, both from a month-over-month and to quarter-over-quarter basis. And we continue to be very pleased with the demand and also the feedback that we're seeing from physicians.

Okay. So do you have any sense of, I guess, quantitatively, the impact of the Teva launch on the uptake? And maybe similarly, quantitatively, the impact of the free drug program -- or the free sampling program that you started last quarter on reported revenue?

Yes. So we did roll out the free trial program starting in October, and we've said that the majority of treatment forms that have come in to our hub have had an associated request for the free trial. Obviously, we had a strong Q4. And we're pleased with the continued demand that we're seeing. With regards to our competitor, we're really focused on doing what we need to do in terms of building the market, and that means raising awareness, driving diagnosis and treatment with INGREZZA, and then letting the results speak for themselves.

Great. Then just one last question on AbbVie and elagolix. Actually, I guess, we are anticipating the uterine fibroid still this quarter. We had actually thought it would be earlier in the quarter. Do you have a sense of where it is and when we might see it?

Well, we only have about 6 more weeks left to the quarter, so it will be sometime within those 6 weeks. That is all completely in AbbVie's control. And as you know, the way that we've behaved in the past, we only want to know about the data and when they're going to be releasing no more than 48 hours in advance. So they don't share anything with us until just before you guys get it.

We'll go next to Biren Amin with Jefferies.

Yes, just on your prior comment regarding a shift in payer mix. Are you seeing more commercial patients over government Medicaid patients?

I think we have said previously that we've seen increasing Medicaid over time as we've moved through the launch. And it has shifted from quarter-to-quarter. And we want to get to a place where we're in more of a steady state before we can really comment on what that payer mix looks like.

Got it. And then what are your efforts -- or what efforts are you undertaking to minimize the impact of the donut hole in Q1?

Well, I can tell you that the pharmacies that are part of our specialty pharmacy network, they have procedures in place that they use, not just for patients that are on INGREZZA but really all Medicare patients, to ascertain prior to the end of the year whether the patient's going to be staying on the same Medicare plan or they're going to be switching plans. Is that patient going to require a recertification for the medications and so on? And so they reach out proactively to determine whether or not there are any administrative steps to maintain that patient on treatment and avoid any interruptions in their therapy. So that's part of what the pharmacies do. It's not, like I said, specific to INGREZZA, but that's part of the benefit of having a limited distribution strategy that -- like we have.

Is that also the reason why you've added a third specialty pharmacy provider recently?

No. I would actually attribute that more towards growth.

Got it. And then maybe just a last comment on the pipeline. Are there any thoughts in developing INGREZZA for Huntington's chorea?

There's a number of indications that we have under review. They're in various planning stages. And so we're probably not going to comment on which indications those are. But any indications, any new indications that we go out on past Tourette's, we'll announce those as they appear on clinicaltrials.gov.

We'll go next to Charles Duncan with Piper Jaffray.

First of all, congrats on a good quarter and progress, and to Chris on an opportunity to spend more time pursuing your hobbies. Had a couple of questions, perhaps one for Eric and then 1 or 2 for Chris and Eiry. Eric, my first question is regarding your comment that the feedback on INGREZZA is that the drug performs as in the real world as it did in clinical trials. And I'm kind of wondering if you could provide any additional colors that -- with regard to kind of efficacy, response rate or in other aspect of that efficacy, or perhaps information from longer-term follow-up. Any further information on that?

Yes. I'm happy to qualify my comments a bit, Chaz. So what I mean by that is that the feedback that we've gotten from physicians is often, when a new drug gets introduced into the market, their personal clinical experience doesn't necessarily match up to what they expect from the clinical trial data. In this instance, the feedback that we've gotten from physicians that have had their initial trial and adoption of INGREZZA is that it really does work like it did in the Kinect 3 study. They're seeing patients coming back with meaningful reductions in their TD symptoms, it's well tolerated. For patients that were started earlier in the launch, they're continuing to show meaningful response to treatment. And so they're very pleased with how INGREZZA is performing. And one of the things that they really like is that it's a very simple product to prescribe and take. And they don't have to really think a whole lot about who are the patients that are appropriate versus inappropriate for treatment because it's been studied in a real-world setting across a wide variety of patients with TD on a wide range of underlying psychiatric treatment regimen. So this is a medication that they can prescribe, it can be layered on top of the antipsychotics that these patients are taking, and it fits right in with their practice workflow. And so that's what I mean by performing as it did in the clinical trials.

Excellent. That's helpful. And then perhaps for Chris or Eiry. Chris mentioned INGREZZA-induced clinical remission Phase IV trial, and I'm intrigued with that. I'm wondering if you can provide any more insights on the timing or -- and/or the design and the point of that trial. And then I had a question on opicapone.

Sure. So for the question on clinical remission. We do see from time to time, both in our clinical trials and in the post-approval world, patients who had been on INGREZZA for a period of time, their TD gets profoundly better and, for whatever reason, they go off the drug and the TD doesn't come back. Now we saw this in a small percentage of patients in our clinical trials, and it was not clear to us what factors were associated with that remission. That is, I couldn't really predict who might have that in advance. And we had some discussions with the FDA about that, those observations, and they said, "We think this could be important information for clinicians and patients alike. We'd like you to do a study post approval where we could understand that a little better." So we are in the process of designing the clinical protocol, which would allow us to follow patients who had a randomized withdrawal period imposed. So take patients on drug who are doing well, and then in a blinded fashion, randomize some to go on to placebo and some to continue on drug and then follow them for an extended period of time, and to see if, indeed, the TD symptoms fail to come back in some of the patients on placebo. And if so, who are those patients? What are their concomitant medications? What's their underlying diagnosis? What are the other factors that may be associated with clinical remission? And so we would plan on starting that study after we work out the nuances of that protocol design with some additional pending discussions with the FDA. So expect to see something start on clinicaltrials.gov, not early this year, but maybe even moving into later this year or early next year.

Okay. Very cool study protocol and hypothesis. My last question on opicapone, perhaps for Eiry, you did a great job outlining what you would anticipate a Phase III could look like to the previous analyst's question, but I'm wondering about timing. Could you start that in '18? And would you anticipate that you could have data by the end of '19? Or what's your thoughts now at this point?

Well, we're working hard (inaudible) for this study and hoping to start that as expeditiously as possible if it were required. We anticipated that it would add about 12 to 14 months to the timing of our NDA if -- compared to if we were not to need the data. And so that really would push into latter part of next year or maybe even a little beyond.

I'll ask one more question of you, but I know you won't answer it, and that is, what do you think, if you were a betting person, will it be required?

I'm not a betting person.

Yes. When we have the FDA minutes, we're going to share those with everyone.

We'll go next to Andrew Peters with Deutsche Bank.

So just one question on Kevin's comments around the next best dollar spent on the commercial side. Just wanted to see if you could provide a little more color on what sort of efforts could you imagine increasing kind of the spend there, kind of on the sales and marketing effort. And then a related question to that around the competitive landscape, with Teva kind of singling out Austedo as one of their kind of key areas of focus amid their period of transition, I guess. What can you do from a scenario-planning perspective if they choose to be particularly aggressive on the sales and marketing effort? What can you expect just in a scenario of planning case?

I'll start out with the second one. We have a lot of respect for our competitor. They're very sophisticated, they have enormous capabilities. But what we actually do from a sales standpoint, from a marketing standpoint, is we concentrate on all the attributes for our drug, as Eric had said. We don't spend any time with health care professionals talking about our competitor. And I may even preempt a little bit about -- on the first part of your question on the next best dollars spent. What we've said from the very beginning is very true today. The ultimate success of INGREZZA is going to be based on being able to educate physicians about tardive dyskinesia, and so that they can easily recognize, diagnose and have a call to action to treat these patients. And so that's really where our efforts lie as we move forward. Eric, do you have anything to add to that? You're okay?

We'll go next to Jay Olson with Oppenheimer.

I had a question about capital allocation, and you touched upon this in the opening remarks when you prioritized the investment in INGREZZA and your other pipeline products. But with $800 million on your balance sheet, can you frame for us how you would prioritize business development, and how that fits into your capital allocation plans, in particular, for 2018?

Yes. To begin, as we highlighted on the call and Kevin just spoke to earlier, our #1 investment is on INGREZZA. And then #2 to that is our own internal pipeline investment. To be able to become a 4-product, 6-indication company 4 years from now is what we're really aspiring to, and believe there's going to be significant long-term value creation created through those investments. So as it relates to, how would we utilize the $800 million on the balance sheet? Number one, it could not distract from maximizing the opportunity with INGREZZA, as well as making the advancements that we desire to make on our pipeline. So we obviously have some financial flexibility at this time, but are really focused on executing INGREZZA as well as our internal pipeline.

And then I had a follow-up on opicapone. There's a 500-patient Phase IV study, OPTIPARK, that looks like it will have results this year according to clinicaltrials.gov. Could you comment on how the results from that trial may contribute to an NDA filing for opicapone?

Yes. So the OPTIPARK trial is really a Phase IV trial that's being conducted by BIAL over in Europe. And so that's one that we wouldn't see as being part of our submission at all to the FDA. I would say that more important to the agency is having all the -- having the existing safety database that BIAL has and then all of the postmarketing safety that's done. The OPTIPARK is basically a pharmacoeconomic study.

We'll go next to Alan Carr with Needham & Company.

A couple of them. In your OpEx guidance, can you give us a sense of how that spurt of kind of growth is distributed between R&D and SG&A? And how much contribution there is from that potential opicapone Phase III program in R&D. And then also, any updates on that Essential Tremor program that -- any new developments there? And then also, can you give us a sense of those Phase I trials that you're running for opicapone? What -- can you tell us a little bit more about those?

Yes. We can go backwards first. So Eiry, why don't you talk about the Phase I programs of opicapone?

So we have several Phase I trials ongoing, and they're actually listed in clinicaltrials.gov now for opicapone. One is to study the molecule in patients with mild hepatic impairment. BIAL had performed a study in moderate hepatic impairment, and we think it's important for us to assess the behavior and exposure of the meds and the appropriate therapeutic doses in mild hepatic impairments to aid with labeling in the U.S. There's also -- there was no (inaudible) pharmacokinetic data included in the BIAL submission in Parkinson's patients, and so we are completing a patient PK study that will be a part of the NDA submission as well. And then the 2 other studies are drug-drug interaction studies looking at potential for interaction around the transporters -- drug transporters. And again, the profile that was shown in the Phase III package from BIAL was of a very well-tolerated molecule at the dose that was approved, with very low propensity for drug-drug interaction. And so we're confident that, that will continue to be the profile as we move forward to the NDA. But we just needed to fill in these small gaps in the package in order to fully address the requirements of the FDA.

So from a financial perspective, a couple of comments. Number one, when you look year-on-year from a spending perspective, we're going to have a full year of expense from the commercial investments that we made in 2017. So that's obviously a big driver to our year-on-year expense increase. And then in addition to that, on the R&D front, 2017 was a really light clinical investment year for the company. So when you take in aggregate the Tourette program, opicapone, CAH, the postmarketing INGREZZA studies that Chris had highlighted earlier, it aggregates to a significant spend increase but, like I said earlier, really positions us well to become -- as we're aspiring to become the 4-product, 6-indication company 4 years from now.

We'll go next to Ian Somaiya with BMO Capital Markets.

This is Steve, on for Ian. In the past you guys have mentioned, I think, you expect about 20% of patients to remain on a 40-milligram dose of INGREZZA. Is that still your expectation? And what are the characteristics of those patients that remain on 40 milligrams? I know there's some stuff in the label just regarding CYP2D6 metabolizers and liver impairment. Is everything captured in the label? Or are there other reasons that we should be aware of that patients would be remaining on 40 milligrams?

This is Kevin. I can take a first swing at that, and then Chris can chime in. So the label says that you go one week on 40 milligrams, and then the recommended dose is 80 milligrams. And you're correct that we had said in the past that, based on the Phase III program that we looked at, that we would anticipate that around 20%, 25% of the patients would be on -- the 40-milligram would be their persistent dose, that, that would really satisfy that patient population quite well. Now that was in a clinical trial setting. What it's going to end up in here, it's way too early to tell. What we see is well within that ballpark, but we just don't know yet how that's going to work out. So the vast majority of the patients are stable on the 80-milligram dose. Chris, do you have anything else you want to add to that?

No, I think you've captured it. It clearly -- in the real world, there are patients that start on the 40 and either go to 80 and back down; or start on 40, are doing so well that they don't go up to 80. But it is too early to know, is that 15%, 20%, 25%? It's somewhere in that ballpark.

Okay. And can you speak a little about the impact of tax reform as it relates to, obviously, the corporate tax rate, but specifically your ability to use your existing NOL carryforwards? I think your federal NOLs start to expire in 2021. So are you still able to get the full benefit of those? Yes, go ahead.

Yes, yes. On tax reform, any NOL that was created prior to the end of 2017, we'll be able to have full access to realizing the benefit of those NOLs approved prospectively without limitation. So any NOL that gets created post-2017, I believe you're limited to being able to utilize 80% of those in any given year of the taxable income. But anything that was created -- any NOL prior to the end of 2017, we'll be able to have fully realized subject to future profit.

Okay. And just last on formulary access for INGREZZA. I think you're expecting many decisions around year-end or into 1Q '18. Maybe you can start on where you are there and how much progress is left to be made, and whether that should be mostly, predominantly completed this quarter or next.

Yes. I should start up with saying that we've been pleased with the coverage that we've gotten thus far in our launch. What we've seen is that some of the plans are moving forward with making -- transitioning, I should say, from interim coverage decisions to solidifying those coverage decisions. In some cases, they're doing so without a full formulary review. What we see is that -- and what has been the case, and continues to be the case, is that for the vast majority of patients, the requirement for reimbursement is that the provider does a prior authorization, submits it to the health plan. In most cases, the documentation requirement is a confirmation of the diagnosis of tardive dyskinesia before the plan will approve reimbursement for that particular patient. So we have seen plans essentially publish their coverage criteria for INGREZZA, in some cases without doing a formal formulary review just based on the utilization that they've seen and the data that we've provided to them.

It appears we have no further questions. At this time, I'll turn it back to Kevin Gorman for any additional or closing remarks.

Thank you very much. So I hope you share our enthusiasm for this year in front of us. There's a lot of important milestones that we're going to have as the year progresses, and they span from the very near term all the way to the end of the year.

Just to kind of start listing things out, we'll be providing you with opicapone path forward once we have the FDA minutes. We'll have the -- our partner, AbbVie, will be -- as we'd said, the uterine fibroid Phase III data later this quarter. And then, obviously, the elagolix PDUFA date, which is very important, next quarter. We'll have CAH Phase II data, we'll have a Phase IIb data for our Tourette program. We'll be announcing a new and novel compound in the clinic. And then, of course, just the continued commercial progress of INGREZZA that we'll be reporting out as the year goes on. So quite a bit on our plate, a lot of important readouts, and we're looking forward to having a 2018 that matches our 2017.

So with that, I want to thank you very much for your attention. And then, one last time, thanking Chris and thanking Tim for the important contributions that they made to Neurocrine over the last decade and more. Thank you very much.

Thank you. This does conclude today's conference. We appreciate your participation. You may disconnect at any time, and have a great day.