Thank you for all you dedicated stalwarts, hardcores. We appreciate the opportunity here to continue here and kick off in our grand ballroom equivalent setting here with Neurocrine. With us, the road warrior CEO, Kevin Gorman, Chief Financial Officer, Matt Abernethy, and together with my colleague, Stephen Sloan, who everybody knows is the only reason that the models all sort of like align. We are very happy to have a discussion here. Lots to talk about in terms of, you know, your portfolio, the pipeline. You're also a particularly apt commentator, and I think that makes very valuable discussions with you, Kevin, and your team, when we think about some of the implications of the broader environment, macro, as well as sort of policy changes. We're going to delve into a bunch of those things.
I'll let you kick off with a little bit of just a highlight of where we are in terms of, 2023. Maybe touch upon some sort of areas of strategic focus.
Sure. Thank you, Chris. Really appreciate the opportunity to be here, and thanks to Goldman Sachs. Matt and I will be making forward-looking statements, I'd like to caution you and have you review our recent SEC filings for all the risks associated with the industry and with Neurocrine. I don't think Neurocrine has ever been operating as effectively as it is now. We've really got a lot to look forward to in 2023. We've accomplished a lot already. We have a still a marvelously growing franchise with INGREZZA that keeps performing. In addition to that, with a pipeline of 14 clinical compounds going through, five of them in registration studies, eight of them in mid to late stage studies, and then 1 in Phase 1.
There's a lot in our pipeline, and I'm sure we will get to many of those things. They do cross all three of the areas that are the core therapeutic areas for Neurocrine, which is neurology, neuropsychiatry, and neuroendocrinology. We have four important readouts in Q4 this year, and two of those are the two phase III clinical trials in congenital adrenal hyperplasia, CAH, one in adults, one in the pediatric population. We have another phase II clinical trial that's reading out in focal onset seizures. We have another phase II that's reading out in anhedonia. Anhedonia is the inability to feel pleasure. It is actual or joy. It is actually a devastating symptom that actually goes across many, if not most, psychiatric conditions. We chose to initially explore it in major depressive disorder. We're in a...
We've got a strong balance sheet. We've got a very clear strategic path that we're on with being mindful of our capital allocation, understanding that first priority is INGREZZA, not only in bringing it to the tardive dyskinesia patients, which we've only scratched the surface thus far, but also Huntington's patients, with a hopeful PDUFA date of August 20th of this year, in order to have an approval in Huntington's disease. It's to invest in that pipeline that I just said, to bring those compounds forward. It's to continue the investment in our internal research so that we have a continuous engine supplying us with new and novel molecules each and every year. I think I'll stop there.
No, lots to, lots to talk about. Obviously, the center of gravity with you guys is always about INGREZZA for TD. Perhaps, Stephen, since you're most attuned to the model, you can give an organized sort of discussion around some of the key issues here, just to sort of see where we are June 15th.
Sure. Kevin, you mentioned that you just have started scratching the surface of the TD market. I was wondering if you can walk through what you see as kind of the key growth levers moving forward, whether that's expanding the TD market, like you talked about the opportunity in Huntington's disease. Just talk through how you're thinking about the next leg of growth.
Yeah, and again, I hate to be a broken record, but I'm a broken record. When we launched this drug, six years ago, there were only 2%-3% of all TD patients had been diagnosed. This had been a disease that was long ignored, long forgotten, but kept growing out there. We've done, I think, an outstanding job, and now that approximately 30% of TD patients have received an actual diagnosis, that means 70% still haven't. It's still very much a blue sky that we have out there. Add on to that, of that 30% that have been diagnosed, only half of them are actually receiving what is API guidelines, frontline treatment, first-line treatment, virtually only line treatment, which is a VMAT2 inhibitor, which is what INGREZZA is.
Now you're seeing out there that 85% of the population is not receiving appropriate care for their tardive dyskinesia. It goes back to, Steve, it goes back to what we have been doing that's been very effective, that leads to year-over-year growth, that's in the, you know, high twenties, 30% growth continuously, is that you need to educate the prescribers. You need to educate all the staff, even those staff that are not prescribers in a community mental health center, in the physician's offices, in long-term care settings. All of them have to be educated. You would say, "Well, after six years, haven't you educated all of them?" The turnover within the psychiatric field is immense in all these offices.
Our sales professionals build relationships, do a lot of in-service programs, get very good traction, as evidenced by how well the drug is doing. Three months later, when they walk in, half the faces have changed in the office, so you're going back again. It's not just one time in to educate, it's not two times. It takes multiple visits in order to get the group, as I will call them, healthcare providers, the script writers and all the support staff, where they feel confident and comfortable to be able to say, "There's an abnormal movement that's going on in this patient.
It needs to be diagnosed to determine is it TD or is it something else, a drug-induced Parkinsonism or Parkinson's disease or a tic disorder? You need to get them confident enough that they know how to diagnose it, and then the call to action that this is having a significant impact on this patient's life and their mental well-being, and therefore, they need to be treated for it. It is continuing to do what we've done and use evolving technologies and the learnings of what we have been successful in the past, and the things that didn't work, and then just move them forward and double down on them. That's, that's the main lever for continuing this growth, which there's a substantial amount of growth to go. You mentioned Huntington's disease.
Everything that has made INGREZZA, the market leader in tardive dyskinesia, really is even that much more important in the Huntington's population. Of the approximately 20,000 Huntington's patients in the United States, there again, our phase III trial in Huntington's disease showed just how effective this drug is in treating the chorea in Huntington's disease. It's every bit as effective in Huntington's as it is in TD when you look at the profound changes in the movements. Again, only a small fraction, maybe 20% of those 20,000 patients with Huntington's disease, are being prescribed a VMAT2 inhibitor, and there's a variety of reasons for that. The INGREZZA, knock on wood, if approved, for Huntington's disease later this year, will surmount a number of those barriers to bringing a VMAT2 to those patients.
I think that will be a very nice lever for growth. As you see, we are investing heavily beyond tardive dyskinesia, beyond Huntington's disease with INGREZZA. We have two phase III trials going on now. One, as using INGREZZA as an adjunctive treatment for the actual disease of schizophrenia, and the other is utilizing INGREZZA in the largest movement disorder in children, which is the dyskinesia in cerebral palsy. There's the investments that we continue to make in INGREZZA. Two of the big investments that in the commercialization that you see, one is we increased the size of our sales force last year, so this is gonna be the first full year of having that increased sales force.
Not only did we increase substantially by 60% the size of the sales force, but we, for the first time, split them into three different sales groups, the largest of which still goes to psychiatrists, then the second largest goes to the neurologist, and then finally, the third going into a new area for us, where we believe maybe 15%-20% of the tardive dyskinesia populations exist, is in the long-term care. Finally, you've seen that we continued our direct-to-consumer advertising. With all the work that we've done over six years in bringing education and the message to healthcare providers, you need the other side of the equation to be able to have a conversation, and that is the patient and their loved ones.
That's why we started several years ago on an unbranded direct-to-consumer, and then about a year and a half ago, on branded, and it's been extremely effective, and so we're continuing that through the rest of this year.
Great. No, appreciate all the commentary there. Very helpful as we're thinking about this year. Maybe, Matt, I'll turn to you. In terms of the revenue profile for this year, I think 1Q is very strong. Some people might have been expecting that potentially raise guidance on this. As currently, the midpoint would imply kind of just low single-digit growth quarter-over-quarter. Can you talk about how you're thinking about the revenue profile for this year and how we should be thinking about performance? It seems like it could be fundamentally very strong.
Yeah. No, I mean, what we saw in the first quarter was tremendous. Record numbers in new patients, that's in a quarter where you typically have seasonal pressure. Coming out of Q1 and what we said on the call was we're very bullish about the growth prospects of INGREZZA. We felt it premature to do anything with guidance, just one quarter in. It's something that we're gonna get through the first half of the year, then we'll reevaluate guidance. You know, overall, I think the growth initiatives that Kevin laid out, number one, on the educational side, that really comes down to the sales force expansion that we did. We're seeing great progress from both the leading indicators and then also the lagging indicators of interact, that seems to be going very well.
As Kevin mentioned, on the direct-to-consumer, patients are seeing that they can get a benefit from this medicine and are bringing it up to the clinicians. From a fundamental perspective, things are very good. The one nuance that we brought up in the first quarter, which was just to simply flag what to expect for Q2, is that we did have a bit of inventory build at the end of Q1 that we know will, you know, dissipate in Q2. We'll see how Q2 shakes out, and then we'll reevaluate guidance.
Yeah. What I will say is that, as Matt said, there was always a seasonal impact of Q1. Q1 was very difficult, not just for us, but for many specialty medicines because of your patient base. Many of them need to get reauthorizations at the beginning of a new year for their insurance. Many of them, at the beginning of a new year, are switching insurances, so it can take more time to that first refill there. Because that is taking place, then the new prescriptions that are being written in that quarter, fall into a larger stack. As we are more and more successful, that stack got bigger and bigger in Q1.
We've gotten, I think, really good at handling that with having a group of dedicated personnel that are there in order to facilitate in a highly compliant way. Getting those paperwork done by the offices and starting in Q4, working with the offices that they can identify the patients that are going to need this. We've gotten very good at that. That's great. That's why you've seen the last couple of Q1s, we're not having as much seasonal impact. It also means that you don't have that big delta then between a low Q1 and a super high Q2, because you're not having that spillover of the patients from Q1 to Q2. It does a nice job of more evening out Q1 over Q2.
That's why we give annual guidance. We don't give quarterly guidance because the dynamics can change, and that's why we gave that. As Matt said, you know, we're still a fairly young commercial company, and we're certainly a young company when it comes to giving guidance. When we give guidance, as Matt said, after 1 quarter, changing guidance just does not seem to be a good proposition for us. In addition, the low end of our guidance was really, you know, if you recall, at the beginning of the year, all the clouds that are hanging over and everyone talking about, you know, an economic recession taking place afar. We kind of envisioned, well, we're not economists, but we gave our best analysis to what that low end of the guidance should look like under those circumstances.
Okay. That's all very useful as we're thinking about this year. It seems like your sales force has gained experience to kind of smooth out that 4Q to 1Q transition, congrats to the team. Maybe one last area on INGREZZA before we move on to the pipeline. Competitively, I think recently, Teva kind of planted a stake in the ground saying that they plan to achieve over $2.5 billion in peak sales with their VMAT2 inhibitor. Curious how you view that number. I know you historically haven't given any sort of peak sales guidance. They recently launched their extended-release version of their VMAT2 inhibitor, which is once daily and not needing a titration scheme. Just wondering if you see kind of any competitive pressure from that product launching.
To go with the first part, Hey, I think what Kevin and Neurocrine firmly agree on is this is a huge underserved market at this point. As we talked about right at the very beginning of my opening remarks, there's a wide open space there. And, you know, Neurocrine is the market leader there, and we anticipate we will remain the market leader in TD, having 2/3 of the scripts versus 1/3 for Teva and deutetrabenazine. As far as them developing an XR formulation, the second formulation that has been developed for deutetrabenazine, first taking it from three to four times a day to a twice a day, and then more recently down to a once a day.
I don't really think that's going to change the dynamics that we have there in the marketplace. Frequency of dosing throughout the day was only one small part of a much broader differentiation and of INGREZZA over deutetrabenazine. There are many other points of differentiation that are far more important than a once versus twice a day. The XR formulation still needs to be titrated, so there is a complex titration. There is no titration with INGREZZA. Secondly is that INGREZZA still is only one pill once a day. For most, well, all but one of their stable final doses that they come to, it's multiple pills of different strengths that need to be taken. That's still a pill burden that's there.
Having two different dose strengths in most of their final doses, that's a bit daunting. Fundamentally, the difference is that they are two completely different drugs. INGREZZA does one thing and one thing only, that we can measure throughout the entire discovery and development of this molecule, all the way to today, with all the efforts we put in. There's only one receptor system that we see that INGREZZA touches, and that's just VMAT2. When you're presented as a physician with a very complex patient in front of you, and now they've presented with tardive dyskinesia, and you're balancing, on average, seven other daily drugs with that patient, you just wanna treat the TD. You don't want to give them a drug that is going to be hitting numerous other receptor systems, that you really don't know what the impact in that is. INGREZZA is the only drug that does that.
Let's move on a little bit to the next product that people are gonna be watching out for. Bring the crine part of Neurocrine a little bit more to the fore, with crinecerfont , CRF1 receptor antagonist, congenital adrenal hyperplasia, CAH. We often are left with trying to figure out how to interpret data and read through into the future. What do we have in hand? We have some phase II data, and I think there's been some updates, in terms of that. You showed that there was correlation between the baseline hormone level and change from baseline two weeks out, 14 days later. This becomes another data point, in essence, that helps us put together this mosaic.
I think everybody on the street is fairly confident, but it's one of these things where, A, we recognize how challenging endocrine diseases can be from a longitudinal standpoint. B, kind of CAH has been kind of a slayer of other efforts. You guys have a very robust and well-established clinical development team. Help us get confident with the phase III.
I'll start out with, I've always appreciated, one of the things about you, Chris, is that you actually do pronounce Neurocrine correctly, and you understand where the crine comes from in the name, so thank you very much.
Okay.
There was a lot there that you asked about this. The phase II program that we ran, both in adults and in the pediatric population, showed extremely clearly that CRENESSITY , a non-steroid, substantially lowers the endogenous hormones...
Mm-hmm.
-that are out of control-
Mm-hmm.
-in CAH patients. I think importantly, what the new data that we've come out with is that CRENESSITY does that regardless of what dose of daily hydrocortisone these patients are on.
Mm-hmm.
Whether you're on a high dose of hydrocortisone that isn't controlling your androgens, CRENESSITY lowers those androgens significantly. If you're on a low dose of hydrocortisone and your androgens are out of control, it lowers it there. If you're on a high dose and it's having some effect on your androgens, keeping them down, CRENESSITY lowers them yet even still. CRENESSITY is working, if you will, to do exactly what it's designed to do. Independent of hydrocortisone, it lowers your endogenous androgens. That's great, because the promise that goes on top of that, and I say it's a promise because that's what the phase III is to show.
Mm-hmm.
Phase II showed we lower the androgens, as I just said. Now, because the androgens have been lowered down, oftentimes to a range of normalcy, can you now stop taking the supraphysiological doses of hydrocortisone and bring them lower? Any lowering...
Mm-hmm.
of a daily dose all your life of glucocorticoids is beneficial. All key opinion leaders agree on that. Any lowering is beneficial. The phase III program, in a larger, more robust population, has two things to show. Show again that CRENESSITY does what CRENESSITY does. It substantially lowers the androgens. It recaptures the fundamental defect within CAH. It recaptures the hypothalamic-pituitary-adrenal axis. What it needs to show in addition, in phase III, would be that you can then lower the glucocorticoids. It makes perfect sense that you should be able to do that. The only risk is, did we design these trials? These trials have never been done before.
Mm-hmm.
Did we design them correctly so that it will show that? We've conducted them correctly.
Mm-hmm.
Because we have all the, all the belts and suspenders in there, and we have the, blinded and unblinded external, investigators in here. Everything I know today says we have conducted this trial exceptionally well.
Mm-hmm.
Did we design it? I think so. We got all the input from FDA, from EMA, from all the key opinion leaders around the world. Our best scientists internally put it together, designed these trials. Come early Q4, we'll know.
The overall logic is very clear, and I think we're quite confident in the team's ability to execute on that. Yet there's always kind of a, some sort of level or threshold, and so when we think about endpoints and how those get met, particularly from a regulatory standpoint.
Mm-hmm.
Can you share with us the extent that we have an approvable endpoint definition, and an agreement from the FDA and the EMA?
Yes. We do have those agreements. We do have agreements that what is necessary here is to show the two things, and that is the lowering of the androgens and the lowering of the glucocorticoids. In the pediatric populations, lowering the androgens is the primary endpoint, lowering glucocorticoids is the secondary endpoint. In the adult population, it's flipped. Primary is lowering glucocorticoids, secondary is the lowering of the endogenous androgens. We've designed a robust studies to do that. They are independent studies, but I think taken together, they're going to give us a wealth of data, and I think they will give the regulatory agencies a wealth of data to the benefit that crinecerfont can bring to these patients.
It's the first drug developed for CAH since the early 1960s. Again, much like TD, one of Neurocrine's fundamental tenets is we go after helping patients whose diseases have been left behind in drug development.
Yeah. No, certainly taking on some difficult tasks. That also means that there probably hasn't been anything new branded to commercialize. Matt, should we be lurking on the website and looking for postings of commercial openings for regional heads and stuff like that? Is this the second derivative indication that we're getting warmer and warmer? Just how do you think about commercializing this?
Yeah, I'd only expect you and everybody else to be scouring all of our open positions, and if you want to join the company, there might be a spot for you guys. No, I think from a commercial perspective, this is something where the patients are treated in a very concentrated way. There's around 30,000 patients in the U.S., somewhere around 30,000-50,000 patients outside the U.S. From a commercialization perspective, this is something that we think we can do very well, very successfully, with fairly nominal investment, especially relative to what we have invested behind INGREZZA and in tardive dyskinesia. We got to get to the data, and with the data that will help inform, obviously, the provability, but then also the price that we can ultimately yield from the medicine.
When you think about the patients themselves, the pediatric population, which is about a third of the patients, those are gonna be the most motivated parents to get a reduction, hopefully, in glucocorticoid exposure for the kids. We expect a large portion of those patients to benefit from a medicine like crinecerfont. The second most motivated would be the female population, obviously, because of the surge of testosterone and different androgens and the untoward side effects that has. Lastly, the longer tail is going to be converting adult patients and motivating them to get adult male patients to get treatment. We're enthused about the opportunity and look forward to the data early in Q4.
Without much lurking, you can actually see that our confidence is backed up by our efforts. We, we purchased a small U.K.-based company-
Right.
Diurnal, who's really got some phenomenal talent in endocrinology.
Mm-hmm.
Particularly in CAH.
Mm-hmm.
One of the reasons why we did that is to get the beachhead over in Europe, in anticipation of commercialization there, and the deep relationships they have with all the European KOLs.
Right. Absolutely prudent. Nothing happens very quickly in that regard over in Europe. We've got about 8 minutes left. Steven, why don't we touch upon some of the pipeline aspects, maybe muscarinic, 'cause it's trending, and then leave me a couple minutes at the end to tag team and ask a little bit about the BD outlook?
Sure. No, that sounds great, Chris. Yeah, maybe we can start with kind of overall portfolio strategy for your muscarinics. Obviously, you do have multiple mechanisms here, targeting both M1, M4, and each of these individually. Yeah, explain to us how you think about these different mechanisms? Is it just we're waiting for the data? We'll let the science guide us, or do you have a hypothesis of which strategy might ultimately be the best for patients?
Two things. Number one is that we've had an active research program on the muscarinics, all of the receptors, for several years, both antagonist and agonist, because it is a fundamental and important receptor system within the central nervous system. Having said that, drugging it has been very, very difficult up until lately. We had been keeping tabs on, watching different companies, seeing what they were doing, forming relationships, helps inform what we were doing internally. I have to give kudos to Karuna and to Cerevel. Both of those companies did an outstanding job in demonstrating for the first time that agonizing the M4 has a significant role to play in the treatment of schizophrenia.
We were then poised, as you saw, as soon as Karuna's data came out, but that didn't quite nail it, right? Because that's a pan-muscarinic agonist. Cerevel's data came out and which is a which is specific for M4. That's when we pulled the trigger on a relationship that we've had long-standing in conversations with Sosei Heptares, and brought in their muscarinic program, married it to our internal efforts. The lead program, being a highly specific, pure agonist at M4, does not need the endogenous ligand in order to exert its function. That's different from Cerevel. It's highly specific. That's different from Karuna. They've both created real good data sets. I think that there's plenty of room here for us to differentiate from them, but the proof is in the pudding.
We have to create that data set, which is going extremely well in a phase IIb study that we have ongoing right now. The clinicaltrials.gov shows that the readout should be in December of last year, the enthusiasm for this molecule out in the clinical community has been very good. I'm hoping that with if enrollment stays the way that it has been, we're gonna be able to pull that data readout sooner next year. The other thing is that M1 seems to potentially have a role in cognition. Does M1 have to be with M4 in order to have that? Does M1 alone have its effects on cognition? Will M1 with M4 have any additive or negative connotations with schizophrenia and other psychological diseases?
You don't know the answer to that, but Neurocrine is in the ideal situation, and the only company to date that's in the ideal situation, that we have M1 specific agonist, we have M4 specific agonist, and we have dual M1/M4. Animal models can only take you so far as you try to explore this complex receptor system. It's going to be the human condition that does, and we're taking all of those into humans. I think you're going to be able to see us as being the ones who will be able to lead the field into understanding this receptor system and having the molecules that, again, knock on wood, as they progress through the clinic, can actually be real drugs.
Okay. I realize we're coming up to the end of time. Maybe one just quick question on the lead asset here, 568, the selective M4 agonist. What signal in the ongoing Phase II study would really give you the conviction to move forward, if you can be, kind of, frame the change in the PANSS score, we could say?
I think, again, I would go back to Karuna and to, and to Cerevel. I think that if you look back on their data, if you look at the very nice strong signals that they have, it would have to be something in that ballpark that would tell us that here's the conviction for us to move forward with this. I think there's also, we look at safety and tolerability, and we look at a number of other, important secondary endpoints that we'll be looking for. When you just go straight out to the PANSS score, that's what you're looking at. Okay?
Got it.
Great. Let's close a little bit on business development. I think the company had a recent anniversary milestone, how many years was the company? I mean, basically bottom line is you're no longer an adolescent. You talked about being a young commercial organization. We get that. You guys are the adults in the room, in the space, and so that means that you have purview to take a look. You have all sorts of infrastructure within your company to fold in commercial assets, development assets. You have a long arc sort of objective. Two quick questions. Matt, remind us, what's the latest commentary that you're going to provide in terms of the size range of the capacity that you have, the firepower to give the unflappable Kyle to go ahead and do things?
Kevin, give us a sense for what your appetite is to do things that are more earlier versus kind of closer to commercial.
I'll take the first part of that.
I'll take the last part of that, but I'll go first.
Okay, go for it.
You have full right to do that.
Thank you very much. you know, there's a lot of business development that just doesn't get seen that we do out there. For a number of years, we've been developing our capabilities within our basic research and within our preclinical groups in order to move, not just being solely orally active small molecules, but for several years, we've been growing out our ability to be able to discover and develop large molecules. That's been a lot of business development that you don't see that we bring in a lot of tools, a lot of things that have helped jumpstart that out there over the last four or five years.
You will see the fruits of that starting in 2025, when we'll be introducing several large molecules into the clinic. You will see multiple large molecules going in every year after that. I can say that because we have a huge substrate that we're working from now in research and preclinical on this. It may sound like, well, you're defocusing. You're going to do peptides, you're going to do recombinant proteins, you're going to do antibodies, you're going to do gene therapy. At the end of the day, it's all protein engineering.
Mm-hmm.
We have developed, I think, one of the industry-leading groups in protein engineering, but that everyone is blind to right now. The proof will be in the pudding coming in 2025 there. As far as business development goes broader than that, I think that we've got a very nice pipeline the way that it stands now.
Mm-hmm.
We have put in a lot of things. We just talked about the muscarinic. We have proof of concept there.
Yep.
We talked about CAH. Clearly, we have proof of concept there, and that's for it, and that's homegrown. You look at the rest of that pipeline, that phase II pipeline, those still lack proof of concept in them. Not all of them are going to work. You don't expect or need all of them to work. You need just some of them to work, and you're off to the races here. I don't know what our appetite is for more pre-proof of concept type of things. If there is something that is very useful that's earlier, another bolt-on earlier type of thing, sure, those deals are real easy to do. They're small. They don't affect your bottom line. We've got a really good pipeline that we believe in tremendously right now.
Mm-hmm.
We've got a commercial, a commercial engine that is humming along extremely nicely, and we've got a research group that we can depend on from now for the next 12 years to be able to supply that pipeline with multiple phase I compounds each year. It would take something special then for us to put money and effort out there in further business development. We look, but there we are.
There we go. From a size perspective, we obviously have a lot of financial flexibility, but as Kevin said, we feel great right now with how we're operating with INGREZZA, the pipeline, data readouts that we have upcoming, and we could, of course, flex our financial capacity upwards, but right now we're controlling what we can control and growing INGREZZA and getting to data, in the meantime, ourselves, our board, the rest of the management team, we of course, look externally, but really focused on continuing to operate Neurocrine.
The last thing I'll say, since we're over time here, but the fundamental thesis that we work from is to bring life-changing drugs to patients, and everything we do is focused on value creation.
Sounds like you guys are a genuine, or is it biopharmaceutical company. Kevin and Matt, on behalf of Steve and myself and the Goldman Sachs team, thank you very much for joining us.
Thank you very much.
Appreciate the update.