Good day, everyone, and welcome to today's Neurocrine Biosciences Reports First Quarter Results. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question-and-answer session. You may register to ask a question at any time by pressing the star and one on your touch-tone phone. Please note this call may be recorded and I will be standing by should you need any assistance. It is now my pleasure to turn today's program over to Todd Tushla, VP of Investor Relations.
Thank you, operator. Good morning, everyone, and thanks for joining our first quarter 2022 earnings call. With me as usual are Kevin Gorman, our Chief Executive Officer, Matt Abernethy, our Chief Financial Officer, Eiry Roberts, our Chief Medical Officer, Eric Benevich, our Chief Commercial Officer, and Kyle Gano, our Chief Business Development and Strategy Officer. Before we get going, I'll remind everyone that during today's call, we will be making forward-looking statements. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to review the risk factors discussed in our latest SEC filings. After our prepared remarks, we'll be happy to address your questions. Now I'll hand the call over to Kevin Gorman.
Thank you, Todd. Good morning, everyone. I'm sure you saw our press release this morning, and I have to say I'm very pleased with the work of our entire commercial and medical organizations in educating healthcare professionals on TD, resulting in a record number of TD sufferers being treated with Ingrezza last quarter. Now, while the external environment has improved, it is not back to normal and there are still challenges. However, I believe we are adapting well to the remote delivery of healthcare, which we know will persist at some level moving forward. We have now seen our fourth consecutive quarter of sequential growth. We're not only making progress on our commercial business.
As you may recall, at the beginning of the year, we updated you on the portfolio of clinical programs that we have started, what we are anticipating starting this year, and the data readouts. It was very aggressive. I'm pleased that we remain on track for most of these programs, importantly, including filing the sNDA for Ingrezza in Huntington's disease and our two data readouts in essential tremor and CSWS. Now, as Eiry will share with you, there are two programs that have been impacted by the invasion of Ukraine, and we are currently mitigating the impact of the loss of those potential clinical sites. Aside from that, we have handled this growing and complex pipeline extremely well, and I'm looking forward to sharing data with you later this year. With that, I'd like to hand it over to Matt, please.
Good morning. As you saw in our earnings release, we delivered strong Q1 performance with Ingrezza sales totaling $303 million in what is typically the most challenging quarter of the year. Our team did a very nice job managing through the Q1 payer-related seasonal dynamics and also rectifying the Q4 pharmacy distribution challenges we experienced. These two items ultimately benefited our refill rate for patients as compared to the previous first quarters. In addition, we exited Q1 with a record number of new patients reflecting an improving external environment and benefits from our commercial initiatives. As you think about Q2, we do expect sequential growth. However, the dollar growth will likely not be as strong as prior years given the benefit we saw in Q1 from our team's improvement in managing through the seasonal dynamics.
On the financial front, we continue to have plenty of flexibility with a strong balance sheet and attractive P&L profile to continue to invest in Ingrezza and advance our pipeline. With that, I'll now hand the call over to Eric Benevich, our Chief Commercial Officer. Eric?
Thanks, Matt. I'm pleased to provide an update for everyone regarding our Q1 commercial progress. With our Ingrezza franchise, Q1 has always been a tale of two half quarters, with the first half of the quarter impacted by seasonal payer dynamics, largely related to the prescription reauthorization process. The second half of Q1 is when we usually see an uptick in new patient starts. With more than 30% year-over-year growth in Q1 this year, what were the drivers of our growth? Despite the surge in the Omicron variant early in Q1, we did see a general improvement in the external environment translating into improved HCP access and favorable conditions to mitigate the typical Q1 payer dynamics.
We knew the key to a successful Q1 was to focus on execution, and our field teams did a phenomenal job delivering not only on strong rates of compliance, but also record levels of new patients. These results were accomplished while we recruited, trained, and onboarded an incremental 140 sales representatives to complete our sales force expansion at the end of the quarter. We expect to see the benefit of the expanded sales force as we get into the back half of the year. As it relates to the second quarter, as Matt mentioned, given our strong performance in Q1, we do expect to see continued growth in Q2 over Q1, but at a slightly lower percentage increase compared to prior years given the stronger-than-expected growth in Q1. This past Sunday was the five-year anniversary of the launch of Ingrezza.
Few expected us to achieve the level of success we've had given the effort required related to diagnosis and treatment of tardive dyskinesia. From a regulatory perspective, Ingrezza was designated a breakthrough medicine by the FDA. It's also been a breakthrough in the sense of completely changing the paradigm of TD treatment. What was once an untreatable condition is now viewed as treatable. What was once a stigmatizing condition is now becoming more mainstream. What was once a dramatically underdiagnosed condition is now more systematically being diagnosed and managed. We've worked hard to change the historical paradigm, and our results speak for themselves. However, our work remains largely unfinished, with approximately 85% of the estimated 600,000 people living with TD either still undiagnosed or not being treated with a VMAT2 inhibitor like Ingrezza.
We've made significant commercial investments to accelerate the diagnosis and treatment of TD, not just this year, but for years to come. The expansion of our field sales team and continuation of our direct-to-consumer campaign give evidence to our conviction to help many more TD patients. Lastly, I'd like to share that the month of May has been designated as Mental Health Awareness Month. This week, in particular, is recognized as Tardive Dyskinesia Awareness Week, or TDAW for short. Five years ago, most people living with mental health conditions were unaware that TD existed. Today, TDAW is now officially recognized across the entire United States. We've made great progress raising awareness in the mental health community.
I'm awed by what our team has been able to achieve in these past five years, and I'm humbled by the scope of what we aim to accomplish in the years ahead as we improve the lives of the many thousands of patients still suffering from TD. With that, I'll turn the call over to my colleague, Eiry Roberts, our Chief Medical Officer.
Thank you, Eric, and good morning to everyone. I'm happy to provide a brief update regarding a selection of our clinical programs, beginning with valbenazine. In March, we received very good news from our partner, the Mitsubishi Tanabe Pharma Corporation, regarding the regulatory approval of valbenazine in Japan for the treatment of tardive dyskinesia. We were very impressed with the data that was generated from the J-KINECT phase 3 study, and we look forward to supporting our Japanese partner as they proceed with launch plans for Dysval, the Japanese brand name of valbenazine. Turning to valbenazine for the treatment of chorea in Huntington's disease. In collaboration with the Huntington Study Group, we were pleased to present additional safety and efficacy data at the American Academy of Neurology meeting earlier this month.
You'll recall in the KINECT-HD study that valbenazine met the primary endpoint of significant improvement in chorea severity versus placebo as measured by the Unified Huntington's Disease Rating Scale total maximal chorea score, with improvement beginning as early as week 2 of treatment. In addition, the percentage of study participants with clinician or self-rated global improvement was significantly higher at 12 weeks with valbenazine treatment than with placebo. Importantly, also, the safety profile was consistent with valbenazine's known safety profile in TD, with no suicidal behavior or ideation. We remain on track to submit the supplemental NDA to the FDA in the second half of this year. I'd be remiss if I did not mention the humanitarian crisis occurring in Ukraine. Our thoughts are with everyone tragically impacted by the current situation in Ukraine, including our contract research organization and clinical research partners in the region.
Like many in our industry, several of our recently initiated clinical programs in psychiatry and neurology intended to involve sites located in Ukraine and Russia. While we've pivoted to contingency plans across our portfolio, the war has already impacted the timeline for the phase 3 study for valbenazine in dyskinesia related to cerebral palsy and the initiation timing for the second phase 3 study of valbenazine for the adjunctive treatment of schizophrenia. We now expect to have top-line data for the treatment of dyskinesia due to cerebral palsy in 2024, while for ATS, top-line data for the first phase 3 study of valbenazine for the adjunctive treatment of schizophrenia remains on track for 2023. Initiation of the second phase 3 study, however, has been delayed to 2023. All other clinical programs remain on track at this time.
Turning to NBI-104, our selective T-type calcium channel antagonist in license from Idorsia. Mid-year, we will read out the data from our phase 2 proof of concept study in essential tremor. In the second half of 2022, we'll complete our ongoing trial in epilepsy with continuous spike and wave during sleep. Based on the review of the totality of data generated for NBI-104, we will then determine potential next steps for 104 in each of these indications. In closing, I'm very pleased with the progress of our clinical pipeline. I want to thank the teams working on each of these programs for their hard work and dedication. With that, I'll hand back to Kevin. Kevin?
Thanks, Eiry. Operator, we are now ready for questions.
At this time, if you would like to ask a question, please press the star and one on your touchtone phone. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is star and one if you would like to ask a question. We'll take our first question from Paul Matteis with Stifel.
Hey, thanks so much and congrats on the quarter. As it relates to your improvement with compliance this quarter, right? I was wondering if you could just add a little bit of context around that. I think historically you've said something like a 7%-8% headwind can happen in one Q with refill delays. What does this look like relative to prior years? Maybe can you just comment a little bit on your expectations for gross and net this year and if there's going to be any increased impact of contracting? Thanks.
Yeah. Hi, Paul. For the gross and net side of the equation, we've guided that the first quarter should be around $5,300 per script, and then for the full year, around $5,400 per TRX. That implies around a 2% headwind in the first quarter. As it relates to the seasonal dynamics, not gonna get into the specifics here, but we did see, I guess, less of a decline moving from refill rates for patient from Q4 to Q1. That was a good thing. It was a good thing we were able to manage through the reauthorization process much more effectively, I think between experience and improving environment from an access perspective that afforded us to be able to do that.
Historically, you've seen that recovery from Q1 to Q2. That added a very nice bump. You know, what we're saying is we do expect to grow sequentially into Q2, but it might not be as at a high of a clip as what you've seen historically. Anything to add, Eric?
Yeah.
Thanks, Paul.
All right. Thank you.
We'll take our next question from Neena Bitritto-Garg with Citi. Your line is open.
Hey, guys. Thanks for taking my question. I was just wondering, first if you could comment on whether there was any impact from inventory during the quarter, and then also just thinking about the guidance, the reiterated guidance, maybe if you could talk a little bit about, you know, what you would have needed to see, I guess, in the first quarter to kind of feel comfortable raising the guidance just given the strength, you know, the progress number this quarter. Thanks.
Yeah. We were really encouraged by what we saw in the first quarter. Record number of new patients, environment improving. We're really only through the first quarter and we've just launched our expanded sales force, so we felt it prudent to simply reiterate guidance at this point. As it relates to inventory, no real comment this quarter. We have gotten into a place where we don't have as many significant swings in inventory. You know, nothing to flag right now, clean quarter from that regard.
Thank you.
We'll take our next question from Tazeen Ahmad with Bank of America.
Hi. Good morning, guys. Thanks for taking my questions. Can you give us a little bit of color on how the split is looking these days between psychiatrists and neurologists in terms of scripts? I know you've had a focus on increasing penetration in the neurologist community. Just wondering how that's going and if you could give us a sense of where you think you'll be by the end of the year in terms of penetration with new neurologists versus adding patients to the group of psychiatrists who are already using Ingrezza. Thank you.
Yeah. Good morning, Tazeen. Historically, you know, and it's really been pretty consistent over the last few years, the split of our business between neurology and psychiatry has been about 80-ish% in psychiatry and about 20% in neurology. You know, certainly, in looking at the development of the TD market, we felt that there was opportunity to better penetrate the neurology segment. You know, that was an important consideration in our decision to expand and reorganize our sales team. We just deployed our new standalone neurology group. Obviously, we've hired people with considerable experience and relationships in neurology. But that team is just hitting the ground, so to speak.
I think we'll have a better sense of how it's going with further developing the neurology segment of our business as we get into the second half of the year. I should also comment that an important group for us across both psychiatry and neurology is advanced practice providers. Part of the rationale for expanding our field sales organization is to do a better job of reaching and educating nurse practitioners and physician assistants in both neurology and psychiatry.
Okay. Thanks, Eric. Maybe just a quick follow-up. You know, this year was the first year that you provided sales guidance for the year. Some companies have gone as much as to provide their thoughts on what they think peak sales could be for products. Do you at Neurocrine have a sense of where you think Ingrezza sales could peak longer term?
Yeah. Tazeen, we're not prepared to talk about peak sales, haven't been and probably won't be.
Okay. Had to try. Thanks, Kevin.
We will take our next question from Joshua Schimmer with Evercore. Your line is open.
Great. Thanks for taking the questions. First, SG&A seems to be annualizing much higher than the guidance. Were there one-time charges in the quarter to note? Ongentys doesn't seem like it's doing particularly well commercially. What do you think is going on that's limiting uptake? What are your plans to minimize losses from this product? to avoid launching other products in the future that don't achieve commercial success? Thanks.
Hi, Josh. It's Matt. In regards to the SG&A spending, really two dynamics that occurred during the quarter. The first is the seasonal spending. If you look back over time, there has historically been a step up from Q4 to Q1 that are Q1 specific investments that we make. You would expect that might pull back a bit as we head into the second quarter. Then in addition to that, we did invest in our sales force. Most of them were on board for the quarter going through training and were recently pushed out into the field at the beginning of April. Within our guidance range that we've provided today, you know, we're confident that's the right level of spending.
As it relates to Ongentys, you know, as Eric mentioned previously, we have an expanded sales force at this point with a higher focus on neurology. We're gonna continue to focus on calls to neurologists for both TD and then also Parkinson's disease. It is something that we're looking at, Josh, and ensuring that if we are making the investment in Ongentys, that it does drive the right kind of returns. I think it's straightforward. The sales are a bit lower than what any of us would have expected at this point. We do hear positive feedback as to the benefit that it's providing to patients. It's something that we're spending a significant amount of time looking at and talking through.
Yeah. If I could just tack on to that. Ongentys is a really good product. The anti-Parkinson's category is challenging from a payer access perspective. Frankly, the way that health plans manage anti-Parkinson's drugs is to really limit access to branded medicines across the board. Ongentys will continue in 2022 to be, you know, primarily approved in the prescription process through formulary exceptions. The feedback that we get from prescribers is very positive. You know, we're gonna continue to press forward with our new neurology team driving, you know, initial trial and adoption of this medicine. We feel like it provides an important benefit for Parkinson's patients. You know, we're committed to moving to sort of neurologists.
Thanks very much.
We will take our next question from Anupam Rama with JPMorgan. Your line is open.
Hey, guys. Thanks so much for taking the question. Maybe a quick pipeline question from me. Just thinking about the mid-year readout in essential tremor, the phase 2. You know, how are you thinking about dataset, that dataset and, you know, what would you describe as sort of a win scenario there? Thanks so much.
Hi. Thanks, Anupam. Good morning. We are on track to read out the data from our proof of concept signal-seeking phase 2 study in essential tremor with the T-type calcium channel antagonist mid-year. The primary endpoint for that study is a crossover study, single center, well controlled program in 28 patients. The primary endpoint is an accelerometer measured quantitative endpoint of maximal tremor change from baseline. We'll obviously be interested in that as evidence of pharmacological activity of the drug in this important disease state. In addition to that, we do have the more traditional TETRAS clinical endpoints in that study as well, and we'll be able to compare the tremor measures across placebo and active treatment for each patient against those endpoints in addition.
We'll look at the totality of those data to understand what signal we're seeing, and using that, we'll go forward to regulators if we have a positive outcome to understand next steps for a registration program.
Thanks so much for taking our question.
We will take our next question from Carter Gould with Barclays. Your line is open.
Great. Good morning. Congrats on the quarter. I'm gonna ask a follow-up to Anupam's question there. Just as we think about that 104 data coming out, can you talk about then sort of the urgency to move forward given relative you know you're somewhat behind your peers. Should we be thinking that you'll wait for the CSWS data before then engaging with regulators? Or once you have sort of the ET data, you can kinda move forward on its own and not wait for those data? Thank you.
I think we're looking at these programs independently. They're both very important potential indications for this medication. Obviously we'll learn from one study to the other, particularly in terms of tolerability in different patient sets. We will be looking at these independently and moving forward.
And-
Let's take the next question, operator.
We'll take our next question from Phil Nadeau with Cowen and Company. Your line is open.
Good morning. Thanks for taking our question. Back on Ingrezza's commercial success. The field is today in terms of in-person visits. What's the latest statistics on the proportion of visits that are in-person? What's Neurocrine's thoughts on when the reimbursement could change to make in-person better compensated than virtual visits? Last, how levered is Ingrezza's performance to in-person visits? Would you expect an acceleration in an Ingrezza growth once more visits are in-person? Or do you think that the virtual commercial efforts that you're doing has really made it less relevant whether patients are seeing their physicians in-person or virtually? Thank you.
Hi, Phil. The latest data that we've seen is that telemedicine still constitutes about half of all visits in psychiatry. Telemedicine is utilized at a lower rate than other physician specialties. It's less than 10% of paid visits in neurology, for example. Psychiatry still stands out as an outlier in terms of the use of telemedicine. In terms of you know, how that's going to change over time, you know, certainly as long as the public health emergency declaration is still in place, the temporary waivers that were issued by CMS remain in place, including parity of reimbursement for a virtual visit versus an in-person visit.
In the market research that we've done with physicians and psychiatrists in particular, their expectation is that in the future they will utilize telemedicine at a lower rate, probably more like in the 20%-30% range. That's after there's changes to reimbursement and some of the temporary waivers have been removed. From a business perspective, you know, we continue to operate as if the status quo is going to continue out into at least 2023. Certainly a lot of the work that we've done to adapt our business model to our HCP customers, changes in terms of how they're delivering healthcare have paid dividends.
You know, certainly I think that's reflected in, you know, for example, the strong Q1 that we just experienced. Any changes to telemedicine in the future or any reduction in telemedicine and increase in in-person visits is really just upside from our perspective.
Phil, the only thing I would add to that is, as Eric said earlier, our enhanced focus on advanced practice professionals. They utilize telemedicine far less than psychiatrists do. They're really the front lines for delivering psychiatric care, and so that gives us more in-person contact with healthcare professionals than if we just focused on the psychiatrists.
Very helpful. Thank you.
We'll take our next question from Brian Skorney with Baird. Your line is open.
Hey, good morning, everyone, and may the fourth be with you. I know it's been a while, but we're finally seeing crinecerfont's phase 3 program coming on the horizon next year. Assuming success, I'm just wondering how you're thinking about commercializing. It seems over the years you've come to focus more on the neuro side of things and less on the crine side of things. Is this an area that you would want to build out a separate sales force for, or are you thinking about evaluating strategic partnerships or a full sale? Just trying to think ahead to next year upon success, what the build-out should look like.
Thanks, Brian. I think our plan is still, as we've said all along, we would plan on commercializing crinecerfont ourselves. And in addition to that's not just in North America. We look forward with crinecerfont to be able to internationalize Neurocrine, and it could be one of several drugs that we find that Europe would be an ideal location for us to begin to put down a commercial footprint. We do not plan on looking for a partner either in North America or in Europe.
Is there any way you could kind of give some qualitative description on or even quantitative on what kind of the build-out to launch a crinecerfont would look like?
Hey, Brian. We'll of course get into more detail around that as we get closer to potential launch, but the footprint isn't too large. You think about how these patients are cared for in a very concentrated way by either pediatric endocrinologists or the adult endocrinologists. The sales infrastructure to be added to commercialize this isn't too significant and something that's well within our wheelhouse and capabilities.
Great. Thank you very much.
I'll take our next question from Brian Abrahams with RBC Capital Markets. Your line is open.
Hi, good morning. This is Steve on for Brian. Congrats on the progress and thanks for taking our question. For Ingrezza and Huntington's Chorea, curious if we could get a little more on how clinicians reacted to the full data presented recently and maybe your view on what type of patients will see the strongest uptake early on. Thanks.
Yeah, I can start on that, Brian. Good morning. So we were able to present the more of the data from our Phase 3 KINECT-HD trial at the AAN just recently. I think in general, the response was very favorable as it has been from the investigative group and even the community to the data that we were able to share.
As you remember, we saw highly statistically significant improvement in the total maximal chorea score at week 10-12 compared to baseline in individuals with HD, together with improvements in the clinician's global assessment and patient global assessment of severity. From that perspective, and in particular as well, the tolerability and safety profile was very consistent with what we've already seen for Ingrezza in tardive dyskinesia with no indication of suicidality. I think we were very impressed by that profile. We continue to be on track with the long-term safety data generation from the 6-month data that's required for the submission later this year, and we'll be moving forward with that.
Thanks.
We will take our next question from Jay Olson with Oppenheimer. Your line is open.
Oh, hey, congrats on the quarter, and thank you for taking the question. Since Neurocrine has a strong cash position on the balance sheet and a solid track record of business development, can you talk about what types of deals and therapeutic approaches you're most interested in these days? Thank you.
Thanks, Jay. This is Kyle. Obviously, what you've seen over time is it's kind of a three-pronged strategy in how we allocate capital over time. It's number one, focusing on Ingrezza and building out the indications there with the lead in tardive dyskinesia. It's supporting the pipeline and then business development. On the BD side of things, you've seen a range of collaborations that we struck over the years. I think what you see is that the strategy lies at the intersection of looking for novel medicines and development that treat or address conditions of unmet medical need, and then looking at partners that offer a technology and expertise programs that complement our own.
I think largely we'll continue down that line and that strategy as we move forward and where we can find programs that range from early to late stage. These are all things that we would consider, as time goes along. Matt, do you have anything to add to that?
No, I think we have a lot of flexibility to your point, Jay, and we're gonna continue to operate our business focused on Ingrezza and advancing our pipeline, but you know open to you know things to in-license or potentially acquire, so.
Let's move to the next question, operator.
We'll take our next question from Danielle Brill with Raymond James. Your line is open.
Hey, guys. This is Alex on for Danielle. Thanks for taking our question. Just out of curiosity, what do you think is the key driver for new patient starts, increased foot traffic, the sales force, the direct-to-consumer campaign? On just the foot traffic angle, we're curious whether you are seeing any sort of inhibition based on some of these BA.1.2.3 variants?
Yeah, I think that the answer is all of the above, in terms of what's driving new patient starts. You know, certainly, you know, the overarching theme for our launch these past five years has been to increase awareness and drive diagnosis of TD. You know, through educating HCPs and then more recently through the efforts that we've had, with the patient and care partner population, as evidenced by the success of our DTC campaign. You know, whether it's the HCP, the psychiatrist, the nurse practitioner being more diligent and having a an awareness and a proactive screening approach for TD, whether it's the patient bringing the symptoms up during their visit. Our goal is to make sure that TD gets diagnosed and treatment gets offered.
Certainly as the COVID environment improves and there's more face-to-face interactions between the providers and the patients, that also helps. You know, all of these things, you know, we think are positive drivers for growth of the franchise. With regards to the most recent variants, you know, certainly, you know, you see, you know, regionally, some changes in terms of reported rates. What we're not seeing as much now is changes in terms of how we're dealing with COVID societally. There's not as much likelihood for closures and things like that. Overall, I'm pleased with the progress that we're seeing in the market.
Brittany, let's move to the next question, please.
We will take our next question from Myles Minter with William Blair.
Hey, congrats on the quarter. Just on NBI-1117568, the M4 agonist, that's moving into phase 2 this year. Are you also planning to do any cardiac safety monitoring studies either before or alongside that study, just given the debate there is in the field with the cholinergic mechanism? Thanks.
Yes. Thanks. We are moving forward and are on track with our plan to commence phase 2 study in schizophrenia for our selective M4 agonist later this year. I think we will be including all appropriate safety and efficacy measures in that study in acute treatment of schizophrenia. I think once we release the full protocol in the context of ClinicalTrials.gov, obviously you'll be able to see exactly how we're measuring some of those cardiovascular and other safety measures in the context of the study.
Okay, fair enough. Thanks.
We'll take our next question from Chris Shibutani with Goldman Sachs. Your line is open.
Yes, good morning. I just wanted to clarify the updated, what appears to be operating expense guidance. It looks as if the range for the R&D is slightly diminished, SG&A is slightly higher. You have discussed some of the push-pulls, that were reflected in the first quarter, but, maybe if you could just help provide further color in terms of what guided those changes. Thank you.
Yeah. From an expense guidance perspective, overall expense guidance was held neutral. But then we had, like you said, Chris, an increase in SG&A, a slight decrease in R&D. I just think that's a reflection of some of the onboarding of sites. I think we mentioned in Eiry's prepared remarks in the Ukraine and some of the spending behind those programs was a bit delayed. On the SG&A side, saw continued places for investment that would allow us to continue to market Ingrezza more effectively. Felt it prudent to update the operating expense guidance for those sort of reclassifications of how we're allocating our spending.
Brittany, let's move to the next question.
We will take our next question from Charles Duncan with Cantor Fitzgerald.
Yeah, good morning, Kevin and team. Congrats on the commercial successes this year. Had a quick pipeline question, actually multipart question for one oh four, and that is in essential tremor and CSWS. I guess I'm wondering, as you contemplate moving forward with that, would the candidate actually leverage the existing neurology sales force, or does it represent an opportunity to move into rare epilepsy? And would that result in perhaps expanding the sales force to capture that? Then can I compare and contrast the call it burden of disease in essential tremor versus CSWS? Thanks.
Chaz, this is Matt. Similar to the question on CAH, we'll provide more insight as we get closer on the commercial call points. Clearly, you know, some of the neurologists treat patients without epilepsy. We would have to expand, you know, the call activity if we did go into epilepsy, especially on the rare side. You know, when you look at a broader indication like focal onset, which is the second indication that we're exploring with the Xenon compound. I know I'm talking. Sorry. From an epilepsy perspective, those would be what you'd leverage together. It wouldn't be specific to our current call activity.
Yeah, just to comment on the two different indications. Obviously, essential tremor and CSWS are very different in terms of their indications. I would make a couple of comments, though. First of all, I think from a mechanism of action perspective, there's good reason to believe that we have an opportunity potentially in each of those indications to add value to patients. The second thing I'd say is there's significant unmet need in both of those indications. For essential tremor, there's obviously been no medications approved since propranolol back in the 1970s. For CSWS, there are no medications currently approved for those individuals. I think we believe it is very worthy of exploration in both of those indications.
Obviously we're not gonna have to wait too long to understand whether we have some positive signal and adequate tolerability to be able to move forward.
Great. Brittany, let's keep plugging away. Next question.
We'll take our next question from Laura Chico with Wedbush Securities. Your line is open.
Great. Thanks for taking the question. I just wanted to ask a follow-up with respect to ET commercial opportunity and market access. With the case of Ongentys, we've seen a little bit of trouble driving revenue there, and you've talked to some of the challenges. I'm just wondering if you could discuss a little bit about the ET market and what gives you confidence that those barriers would not replicate from Parkinson's to the essential tremor opportunity. Thank you.
Yeah, I'll jump in here, Laura. As we're going through this program, essential tremor is the largest movement disorder that exists with nearly 10 million patients in the United States and a little bit more over in Europe. We're at the very beginnings of this program. We did initial work that showed for a very good commercial opportunity here, but it will be several years till we will be out in that marketplace. A lot is going to change between now and then. I think anything that we would say now about any type of commercial plans or what the marketplace looks like will almost certainly be obsolete by the time that we're on the market. As we get closer, we'll then start talking about those aspects of the program.
Right now we're solely focused on the signal-seeking study that we have ongoing that'll report out here shortly.
Brittany, let's go to the next question.
We will take our next question from Vamil Divan with Mizuho Securities. Your line is open.
Great. Thanks for taking my questions. Congrats on what looks like a solid quarter. Todd, thanks for keeping the call pretty tight, this morning. Helpful on a busy week. Maybe if I could just sort of follow up on the NBI-827104 questions from before. I think you've spoken a lot around ET and kind of expectations. Can you maybe just frame how you're thinking about, I guess this is for Eiry, in terms of CSWS? What exactly are the key sort of things you'll be looking for in that phase two data set? What are the key factors to decide whether to move forward with that, with that program and that specific indication? Thank you.
The phase 2 study we have ongoing in CSWS right now is in 24 patients. The thing with CSWS is that these individual patients, in addition to having significant issues with seizures, they have a characteristic signal on their EEG measure, the spike in wave measure on the EEG. That is the primary endpoint in this initial phase 2 study, is the ability for 104 to reduce the signal that is seen on that EEG overnight in patients in an inpatient setting when you compare baseline to primary endpoint.
In addition to that, obviously, we will be looking at seizure frequency in this patient population together with obviously additional safety and tolerability endpoints and measures of functionality, both clinical and physician assessed. From that point of view, I think we'll be looking at the totality of the information that we see from this early phase 2 study in order to determine whether we're seeing a signal of appropriate magnitude to be able to move forward.
Thanks for your one question, Vamil. Brittany, let's go to the next.
We will take our next question from Marc Goodman with SVB Leerink. Your line is open.
Yeah, Kyle, you were talking about business development and the strategy and stuff, but I was curious what was going on just behind the scenes with respect to just discussions with companies and with, you know, valuations down so significantly, whether, you know, discussions have been enhanced if, you know, companies that you were talking to before that, you know, didn't have an interest because of valuation. If those, you know, have changed. Just a little more color there. Matt, can you just confirm the tax rate discussion that we've had before, 5% this year, 24% next year is still confirmed? Thanks.
On the business development side of the questions here, I think if I just make two points. One is I don't think we've had sufficient time during this downturn that we've seen for companies to fully come to terms with the current valuation. They're still a line of sight to where they were, you know, 12, 18 months ago, so we're having to deal with a little bit of that. Other than thinking about time being something that would be of benefit to us and seeing stock prices for companies that are diminished, continue.
The thing that we notice, and I'm sure that you have as well, is that quality companies with quality programs, they don't tend to be the ones that have been, you know, hit as hard in this downturn that we've seen. For a lot of the things that we're interested in and looking at, valuation and decreased valuation really isn't a topic of discussion. I think that's something that we have seen over time. Those things that are good quality assets tend to do well. On the tax rate, yeah, I think from a cash tax perspective, you could expect us to be a state cash taxpayer this year with a bit of cash tax on the federal side by the end of this year.
You may know this, but there's a tax legislation in place that you now have to capitalize your R&D and take that as a deduction over a long period of time. Because of that's gonna cause us to burn through NOLs more quickly than we otherwise would have. I know this is an issue not just for us, but across the industry and others. Hopefully it does get, you know, either delayed or pushed aside permanently, 'cause it could impact innovation. But for us, it puts us in a place where we would spend around $10 million exiting this year, and then next year we would be a full cash taxpayer on the federal and state side of the equation.
Our medium-term effective tax rate, I would just say as we always have, around 24%-25% is what you should expect.
Let's keep on trucking, Brittany.
We will take our next question from Jeff Hung with Morgan Stanley. Your line is open.
Thanks for taking my question. For the Ingrezza sales team expansion, I realize it might be a bit early, but what are you seeing in the leading indicators? Typically, how much of a lag is there from the leading indicators to seeing new patient starts being generated? You know, is it more 2-3 months or more like 6-8 months? Thanks.
Yeah. I think leading indicators, you know, from my perspective is really related to promotional activity, sales calls, peer-to-peer speaker programs, use of samples, et cetera. You know, and the lag that we typically see in the industry, I think is relevant here for the Ingrezza brand. It's, you know, it's within a quarter. So the activity, you know, that we're doing now typically is gonna lead to patients being identified and started on treatment in a month or two down the line. That's a pretty normal kind of lag time that we'd see. Yeah.
From a sales force expansion perspective, what we saw, you know, two years ago or three years ago when we did the most recent, you know, it was two quarters where you started seeing some of the benefit, and by the end of the third quarter, they were producing or performing at a similar rate. There's a lot of leading indicators and KPIs that we're looking at to measure how much traction we're gaining, but it does take a few quarters for it to start generating incremental revenue. Yeah. I will clarify, you know, with Matt's comments that it takes a little while for someone that's new to get the same level of traction as someone that's experienced in the market.
That's what we're focused on right now, helping our new folks to get up to the same level of productivity as the legacy team.
Brittany, let's go to the next one.
We will take our next question from Ami Fadia with Needham & Co. Your line is open.
Hey, guys. Thank you for your time. This is Amin asking for Ami. I was wondering if you can elaborate more on how you differentiate the 104-
Program from the competition right now in the market. There are some other companies pursuing T-type, like, calcium channel blockers in ET, and they're relatively in the same middle in the race as you. If you can add some more color on that would be great.
Yeah, I mean, I think NBI-827104 is a highly potent T-type calcium channel antagonist and, CNS preferring in terms of its distribution. From that perspective, based on the pre-clinical data as well, we have a favorable profile to take into the clinic to assess. Obviously, we're designing the study such that we're able to look at both efficacy and tolerability in these initial phase 2 studies. At that point in time when we have more information, I think we'll have a better understanding.
Super. Let's go to the next question.
We'll take our next question from Yatin Suneja with Guggenheim. Your line is open.
Hey, guys. Thank you for taking my question. I have a question on the M4 program that you have. Can you maybe just talk about, like, how your program differentiate from other M4 agonist or the PAMs in development, given a couple of them are significantly ahead? Like, how are you thinking of differentiating there? Is the specificity on the M4 or the potencies where you think it differentiate, or the differentiation is around the tolerability profile? What are the next steps there beyond the schizophrenia program that you're planning to initiate? Thank you.
The M4 program that we have in hand, through our collaboration with Sosei Heptares, is a highly selective orthosteric agonist. One of the potential advantages of an agonist over some of the competition is the fact that there's no requirement for acetylcholine to be present in order for the agonist to be effective. Obviously, we do not have clinical data in schizophrenia yet. We are starting that phase 2 program in schizophrenia later this year. As you can imagine, we are considering a range of other indications. As we move forward potentially with those, we'll be able to talk more about that.
One more.
Let's go to the next one.
We will take our next question from David Amsellem with Piper Sandler. Your line is open.
I guess that's it, Brittany.
There are no further questions on the line. I will turn the program back over to Kevin Gorman for any additional or closing remarks.
Thank you very much. I really appreciate everyone's participation today. As you can see, we're trying to get through all of the questions. That's important to us that everyone gets an opportunity to ask us questions. I'm just gonna close with that. Right now, the company is, to use the metaphor, hitting on all cylinders, as I would say. We're very pleased with the trajectory of Ingrezza and our ability to bring that into more and more PD patients. That is even without the impact of the sizable investment that we've made with the new sales forces that are out there. I'm also very pleased that with a large and growing pipeline, that we have aggressive goals this year.
As Eiry said, yes, the conflict that has taken place, the tragic conflict over in Ukraine, that has impacted a couple of programs that we were going to be starting up some clinical sites over there. We're gonna work through that. The challenges we face are, I don't have to say, obviously, small compared to the challenges that the people of Ukraine are suffering. We will get through this with only minimal impact on the company. All the other programs are working out quite well. We're very much looking forward to sharing the results later this year for the T-type calcium channel 104 in both ET and then in CSWS.
I would say, the following year, 2023, is going to be a wealth of data readouts that we're going to have. We're very much looking forward to, the rest of, this year to be able to progress, our business in what is shaping up to be a much more open and normal environment that we're going into. No guarantees, but, we're very pleased with the way things are shaping up for us throughout 2022. Looking forward to getting together, with many of you in person, in the coming months. Thank you very much.
This does conclude this program. Thank you for your participation. You may disconnect at this time.