Thanks for joining us. I am Tazeen Ahmad. I am one of the senior SMID Biotech analysts here at Bank of America. Thanks for joining us at our conference again this year. It's my pleasure to present our next management team, Neurocrine Biosciences. Sitting with me are two familiar gentlemen. To my left is Kevin Gorman, who is, of course, CEO, and to my right is Matt Abernethy, who is the Chief Financial Officer. Gentlemen, thanks for joining us again.
Thank you very much, Tazeen, and also thank you for letting us speak here again.
Of course. I think, Kevin, at this point, most people know about the company and what it does, but, maybe you could just give us a quick one-minute intro, about Neurocrine, and then we can go straight into Q&A.
Yeah, I see how you put that time constraint on me. One minute.
Just a minute. Just one.
Neurocrine is a neuroscience company, has been throughout the entire history of the company. Neuroscience to us means neurology, neuropsychiatry, neuroendocrinology. We have our leading product that we sell that was discovered and developed at Neurocrine is INGREZZA. This is for a irreversible movement disorder caused by antipsychotics. It's called tardive dyskinesia. The product's been on the market for 6 years now, and we've given annual guidance for this year of $1.67 billion-$1.77 billion. It's been truly life-changing for TD patients. Having said that, we're still only hitting a small fraction of the TD population, there's a tremendous amount of growth with this product.
We have been building over the last several years a pipeline in all three areas that I collectively said make up neuroscience. I'm sure we're gonna talk about those. It's approximately 14 drugs that we have in the clinic, and we'll be adding to that later this year. I would say that we have a very healthy balance sheet that we're constantly looking to put to work. That was the 1 minute.
Yes. Perfect. Thank you. Let's talk about INGREZZA. This is a mature launch now, but at the same time, there's still a lot of upside opportunity. You did have a good quarter relative to, I think, previous cycles. I think the gap between 4Q and 1Q results wasn't a dip in the way that historically it happened. Should we expect that to be the case on a go-forward basis now that the drug has normalized in so many different fashions, you can better predict a lot of what's happening and of course, you do have a lot more resources on it?
Lots there. You're right. The drug is a drug that's performing really well.
Mm-hmm.
What I would note is that if you look at it from a sales perspective, in our 6th year, this is a 36% increase year-over-year. That's pretty remarkable for a drug. Let's talk about the base business because that really tells you the health of your franchise and the health of the company. The base business is over 30% year-over-year growth still in year 6. We have a seasonality to the drug, as you alluded to there. Q1 is usually our most difficult quarter. Why is that? Well, we're a drug that is a specialty drug, meaning that in Q1, a lot of patients are changing insurance, or a lot of insurances, whether it's government or whether it's private pay, require that you get reauthorized, all happening in Q1.
Every year, as we grow the number of patients that we have under care, that means that that reauthorization pile gets larger and larger. We've gotten pretty good now, I think at doing that. We do still get some surprises, I think, in some years, where we have instituted policies in order to, in a very compliant way, be able to help prescribers and pharmacies be able to deal with that influx in order to make sure that the patients all stay on drug throughout Q1 and into Q2. As you said, normally there's a dip from Q4 into Q1. We did not have this here. Normally, you see a weak-ish Q1 because we call it a quarter of two tails.
Mm-hmm.
The first half, everybody in the field is just trying to make sure that patients get through the reauthorization and get their first refill for the year. They're not out there doing what they really like to do, which is bringing the medicine to new patients. They only have the last six weeks generally to do that. Our team really outperformed this time. They got basically everyone on drug pretty rapidly, and we set a new record for new prescriptions, NRxs. To have that happen in Q1, we would have told you that can never happen in a Q1. It really was quite good. You know, in our earnings call just was that a week ago or two weeks ago?
It was last week.
They all run together.
It seems like months ago.
Yeah. you know, I think people, you know, got a little bit nervous when we said, "Hey, Q1 was outstanding." When you've seen us have a low Q1, that means we didn't get everybody in.
Mm-hmm.
in Q1. Means all those patients, all those prescriptions then float over into Q2. Q2 is a lot better than relatively to Q1. We had a great Q1. Flow over of patients into Q2. We're gonna grow in Q2? Absolutely, we're gonna grow in Q2. Is the delta percentage-wise or absolute dollar-wise gonna be as big as what it is when you have a bad Q1, let's say, or a more traditional Q1? No, it can't for that. On the other side of that, so a little bit of lumpiness between Q1 and Q2, but on the other side of that, when you have a Q1 like this, when you get all those patients reauthorized and a record number of new patients all in Q1, they're with you the entire year because Ingrezza's an incredibly sticky drug.
The patients, their family members, caregivers, all of them, the nurses, the doctors, all the healthcare providers, it's immediately obvious the impact that INGREZZA has on their movements and on their life. They're with us all through the year. The more you bring in in Q1, the more those refills go. Q1 has set us up for a great, 2023.
Okay.
It's our second straight year of sequential growth. Q4 to Q1, historically, we saw a large step down. When you think about the dynamics that Kevin laid out, there's also a gross to net headwind that always occurs in Q1 as well from the donut hole that patients go through. When you think, as Kevin said, the fact we grew TRX sequentially and we delivered in dollars, it was a nice quarter for us.
Right. I think Kevin mentioned, you know, the record number of new patient starts, for example, in Q1. Where do you think that's coming from? Is that from your investment in your sales force? Is it just patient awareness continues to grow? Is there something?
We did two big investments, that were last year and also into this year because it's an ongoing investment. One is that we grew our sales force, and I'll talk about that just a little bit more in a second.
Mm-hmm.
We reinvested in direct-to-consumer advertising and launched our new DTC called Impressions. We've used all the metrics. We've had a DTC campaign, an unbranded campaign that went on for a couple of years, several years ago. We've had a branded campaign that's been going on two years now. When you use the normal industry standards in order to evaluate ROI, the DTC has been highly ROI positive, beats out the benchmarks we set up for ourselves, beat out the benchmarks that is normal and customary for the industry. We're gonna keep that DTC campaign going throughout this year. That helps bring patients in, obviously. Probably the biggest thing is sales reps, that person-to-person detailing that takes place.
Not only did we increase substantially our sales organization, but importantly, we went from a single sales force that 80% of their calls were on psychiatrists, 20% were on neurologists, to now we broke them into three sales forces. The psychiatry sales force stayed the same size, which is our largest number of reps, but they only call on psychiatrists and advanced practice professionals, which are psychiatric nurse practitioners, is what they used to be known as. It's like we increased them by 20% because they no longer call on any other specialties, just psychs.
We formed the second largest sales group, which is the neurology sales group, because we knew that there were more patients we could go deeper in the neuro area and, knock on wood someplace, that in August 20th of this year, we're going to have the second indication, hopefully approved for INGREZZA, which would be in Huntington's disease, which is a purely neurological sale point, neurologist sale point there. We right-sized ourselves to be able to do both tardive dyskinesia and Huntington's disease into there. Then third, something that we always wanted to go into, but we couldn't bite off all of that when we launched and when we were ready to launch into this third area, COVID hit. That was long-term care facilities. We had a plan, we had it on the shelf.
As soon as everything with COVID subsided, we launched now an LTC sales force. We estimate that maybe up to 15% of TD patients are in a long-term care environment. Now getting directly to your question.
Mm-hmm.
that you asked. You only gave me a minute for opening remarks.
Take as long as you like.
The psych sales force, as I said, they're our largest. They're the ones that all the territories stayed intact. There was no change to any of their territories. Minimal disruption that we're doing there. I would say the bulk of our growth that we've seen comes from that psych sales force. Next comes our neurology because this was all launched back in April of last year. Usually takes two to three quarters till new reps are starting to really get their feet, understand their territory, and start performing like what we call legacy reps. The psychs did that quickly. The neurology sales force, I think, is next in line, and you're seeing them adding more and more now. They're really getting up to speed.
The last one is that new territory, new area that we've gone into, which is long-term care. While we hired in that sales force, with a lot of experience in long-term care, none of them were experienced in INGREZZA. They've come up to speed on INGREZZA. They've been prospecting their business. LTC is a very different area to go into than community mental health centers or going into a private office as a psychs or private offices of neurologists. They're very different. They're group homes. They're behavioral health homes. They are long-term care facilities, actual facilities. There's some geriatric centers. There's learning disabled centers that you go into. These are wildly different from one another.
We think that most of the TD patients are probably in just a few thousand of the many, many, many thousands of what are clumped together as LTC. They're the ones that we haven't seen the impact yet, all right? That's gonna be as this year goes on, we will then see their contribution.
A couple questions. Thanks for being descriptive on that, Kevin. How should we be thinking about the contribution from long-term care this year?
Yeah. I would say that they will be very much outstripped by psych and neurologists. As the year goes on, you're just gonna see a step function as they contribute more and more. Like I said, we think that up to 15% of TD patients are in LTC. It really should be a meaningful area for us to be in. Also, there are Huntington's patients in LTC facilities. We'll be training up again, if we get approval on August 20th, which we have all the confidence in the world, but you never know, that we will have that approval in Huntington's disease, we'll be training up the LTC sales force also on Huntington's.
Okay. Everything you just described to me are all, positive trends, upward trends.
Mm-hmm.
Based on the results that you got for sales in the Q1 , maybe this is also a good question for Matt, how are you thinking about sales guide? Is that something that potentially could be revised as the year progresses?
Yeah. I mean, our goal is to continue to grow INGREZZA to maximize the opportunity we have ahead. It's amazing. I think you called it a maturing launch.
Yeah.
You know, the growth that we're seeing in our seventh year now is pretty amazing, and I think it just reflects the opportunity we have ahead. We had a great Q1, sets us up for a really nice year. I think once we get through Q2, we'll see how we're performing and look at our guidance at that point. We're very, you know, optimistic about what we have ahead of us for INGREZZA. Now one comment or note, because I was asked that this morning and Kevin just alluded to it, we have not included anything for Huntington's disease in our annual guidance range. We don't expect it to be a big contributor in later this year.
Mm-hmm.
Just based upon the timing of when the indication might get approved. It'll be more meaningful in 2024, but wanted to make that clarification.
Sure. Actually that was on my question list anyway, so we might as well talk about Huntington's. You'd be competing against Teva with Austedo, who's been in the market now for some time, and as you said, it's a neurology touch point. What portion of that pie do you think could go to Ingrezza over time?
It's interesting. There's not only deutetrabenazine by Teva that's been in there for some years now. That was their first approval. There's like 4 generics of tetrabenazine that these are VMAT2 inhibitors, but they have many off-target hits into there. They're not a exquisitely specific drug that is made just to hit in VMAT2, like INGREZZA is. When you look at 4 generics, a branded drug being marketed into HD, and as we've shown in our phase III program, exceptionally efficacious in treating the movements, the chorea of Huntington's chorea, they have only captured about 20% of the relevant population there. Why would that be?
There's a number of reasons. With all of them, there's a big pill burden, and these patients It's very difficult for them to swallow. They also have a lot of jaw clenching in Huntington's disease. They could crush a tetrabenazine or a deuterated tetrabenazine and get a dangerous drug dump because particularly with deuterated tetrabenazine, it's a formulated drug. That is, that is a big negative there. There's a complex titration that takes place over several weeks. Everything that I just mentioned, INGREZZA has none of those liabilities. We're not a formulated drug. Our drug is a 1 pill once a day because of the inherent pharmacokinetics of the molecule. Number two is we have no titration. First dose can be an efficacious dose.
Third, you can chew, you can break up, you can sprinkle on anything that's, if you cared to make it easier to swallow for these patients, with INGREZZA. There are a lot of advantages, and I haven't even gotten to the mechanistic-
Mm-hmm.
Which is the biggest advantage, of INGREZZA. That lends itself why we're the market leader in TD and why we should be every bit the market leader in HD, even coming in this late. What that tells you is our strategy is not to go after the 20% and switch them. Our strategy is looking at the 80% who are, VMAT2 naive-
Mm-hmm.
go for that. That's the strategy that we're going to be using going forward.
You've talked about your very established relationship with the psychiatric prescribers, and that neurology was your secondary focus.
Mm-hmm.
How has the split in INGREZZA scripts evolved, if you will, between psychs and neurologists? If it's been sticky, is that something that you expect to stay that way, and do you think, you know, that's something that can be changed?
Well, what I would say prior to expanding the sales force and breaking them into three specific sales forces, the relative contributions of prescriptions written in the psychiatric arena versus the neurologist arena really mirrored the call pattern. 80% call pattern in psychs, 20% neurologists, and that's how it looked. I would see that both of them are gonna rise, but they're very competitive.
Mm-hmm.
with one another. You're going to see on a percentage basis, it may stay very close to that. Psychs see the vast majority of TD patients. Neurologists get TD patients referred to them, that's why we're in there, but they're generally getting referred by general neurologists in their area, and these are movement disorder neurologists that we're seeing. I think they're both going to increase, but their relative contribution may stay the same.
Okay. If Eric was here, he's not here, but if he was, what would he say is the biggest challenge going forward? You're a mature launch, but you're still growing exponentially. What would you need to do in order to keep those trends the way they are?
Yeah. Eric is going to say the same thing that I've said, that those of you who've followed us, it's getting a little bit tiring, but I think you're seeing is nevertheless very true. Even with a drug that's approaching $2 billion in sales, you're still seeing this great growth all the way through. We expect that to continue because, honestly, everything has to do with educating the prescriber, educating the patient and their caregivers about what TD is, and then about INGREZZA and the effects that it has on your movements, but more so on your life.
Mm-hmm.
That's there. How is that evident? Well, only about after six years, only 30% of TD patients have received the diagnosis for TD. Half or less of that 30% is actually getting prescribed a VMAT2 inhibitor, even though APA guidelines updated two years ago say first line treatment is a VMAT2 inhibitor. You have 70% undiagnosed, 85% of TD patients out there not being treated. That's an enormous opportunity. That is not a mature market by any stretch of the imagination. It really comes down to what we've been doing, and I think what we've been doing an exceptional job at, it's education, education.
Okay. Do you think you need to educate people more?
Pass me next year.
Okay. Maybe let's talk about pipeline for the few minutes that we have left. I think the one that, you know, people express most interest in is kind of support for CAH.
Mm-hmm.
Can you talk to us about what the data catalysts are going to be this year and how we should level set expectations?
Sure. As I said, we have a deep and rich portfolio, clinical portfolio, again, in neurological drugs, neuropsychiatric drugs, and neuroendocrinology. We have four important data readouts that are taking place in Q4 of this year. Two of them are in phase III's . They're the two phase III's with Crinecerfont, which is for to treat congenital adrenal hyperplasia. This is an orphan disease that is due to a genetic lesion, where the babies are born without the ability to make cortisol. Without cortisol, you die. All of them did until the early 1960s when hydrocortisone was invented. That allowed them to live. Now we have CAH patients who are actually in their early 60s. Nothing has been developed for CAH patients since hydrocortisone.
That's it. There you have a disease. Any of you that have had to take prednisone, a corticosteroid, you know that your physician only gives you a package for about 7 days. They want you on it fast, and then a slow taper for the next 6 days, get you off of that. It's for usually just very short periods of time because of all the side effects that taking exogenous cortisone can cause. These kids and adults have to be on hydrocortisone or other corticosteroids every single day of their life. It's not just trying to replace it levels. That would be fine if you're giving low doses. They have to be given super physiological doses. One of the other manifestations of the disease, it's the endocrine system at its finest.
You have many pathways, and if you've blocked a pathway because of an enzyme mutation where you can't make cortisol, then all the precursors that would normally go to cortisol and others dump into that other pathways. What's the other pathway? It's massive amounts of androgens. A virilization, a masculinization, poor bone health, everything else that goes with that, and especially for females to be virilized now through all of the massive androgens that are being made. The only way that this patient population and the endocrinologists who treated it have been able to deal with it, is with very high doses of hydrocortisone, so they try to turn the system against itself. crinecerfont is the first opportunity to actually introduce a non-steroid, orally active, small molecule drug that goes in and recaptures the system so that you don't make those high levels of androgens.
We've shown that convincingly in phase II studies, both in children and adults. If now you've re-regulated that access, that endocrine access, then you only need to give, one would think, logically, replacement levels of their hydrocortisone. That's what the phase III program is set out to show. Scientifically, it makes a whole lot of sense that you could then lower. You take care of all the deleterious effects of the underlying disease with massive production of androgens, and you can take care of probably equally devastating effects of taking high levels of hydrocortisone all your life. You should be able to bring that down. We're the only company that's ever attempted to do a phase III trials in this. We utilized all the world's experts out there for a number of years in designing these trials.
We think we have the best design possible. There's your risk when it comes to the CAH. Your risk is a trial design risk. We're gonna learn a tremendous amount. I have a lot of confidence that we're gonna turn out to have positive phase III here, but if we don't, if it's muddy, we learn a lot from it. We know the drug works. It's not a binary event. I'm not trying to set anything up for anything. I don't know anything. It's a double-blind study. I don't have any data. I'm just trying to give you what makes you, say, reasonably expect this is gonna be a home run. Because it's never been done before, you have the time to temper that a bit.
Can you just talk to us about what would be good for your primary endpoint?
It's a different primary endpoint for the kids versus adults, because what's the most difficult part for each one of them? For the kids, the primary endpoint is lowering androgens. Second, key secondary endpoint, and there's several secondary endpoints, but key secondary endpoint, as I said, is reduction of exogenously taking glucocorticoids. Flip it for the adults.
Mm-hmm.
because of what's more important to them. As I said, I think, I think in the first step, it's showing in a phase III setting what we showed really nicely in a phase II setting, we can lower their endogenous hormones and androgens, and then showing that we can have an effect on the amount of glucocorticoids.
Yeah.
that they have to take. Those are, those are keys, I think, to this. We'll be looking at all of the, all of the endpoints that we have in there and look at the totality of the data as we put it together and then go to discuss with regulators at the end of this. That's not the only studies, as I said, we have four. We have a phase II study in focal onset seizures with a highly specific and potent sodium channel, Nav1.6 blocker that's gonna read out in the Q4 . Then we have another phase II study in anhedonia. Anhedonia is prevalent in a broad, if not all, neuropsychiatric diseases. It is the blunting of your ability to feel pleasure. It, it is looked upon that you just don't care.
You see that across major depression, anxiety, psychosis, all of your major mental health disorders. We're running a phase II study in that that'll read out. We have next year in 2024, several other phase II and phase III studies reading out.
I think people in the past or now even say that you have a limited pipeline. I'm sure that your view is clearly the opposite of that. You just listed off a number of programs that you'll have near-term readouts for. In general, what's your view on business development? You did make this announcement earlier this year about a new partnership with Voyager, but I think people's view was that that was something that wouldn't really materialize significantly for several years in a commercial way. Is there any desire on your part to continue to look for more mid-stage assets that could be complementary to your commercial presence?
Yeah. I would say that our focus is exquisite on mid and late stage opportunities in business development. We have a lot of firepower there of being able to put several billion dollars to work in that area. We are highly vigilant on that. It's a great place to be with Neurocrine with a wonderful R&D group, basic research that is our bread and butter has always been small molecules, but going into the 21st century of neuroscience now, we understand that we can be, by the end of this decade, curing neurological diseases, and that means biologics. We have all those capabilities within Neurocrine. We have an outstanding team of medical scientists as well as basic research scientists.
We have a very strong balance sheet, and, we are out there vigorously looking in order to even make Neurocrine a more robust company going forward.
Perfect. With that, we are out of time. Kevin, thank you.
Thank you.
Matt.
Thank you.
Thank you for coming.
Thank you.
Thanks, everybody for joining us for this session. If you have any questions, feel free to reach out. Thanks, guys.
Thank you.
Thank you.