Karim, you're now on the webcast. Welcome to the Morgan Stanley Global Healthcare Conference. I'm Jeff Hung, one of the biotech analysts. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. For this session, we have Neurocrine Biosciences with CEO, Kevin Gorman, CFO, Matt Abernethy, and Chief Business Development and Strategy Officer and CEO Elect, Kyle Gano. Welcome.
Thank you very much.
So for those who may not be as familiar with Neurocrine, can you provide a brief introduction?
Well, thank you for asking that question, Penny. It was a warm summer night in ancient Greece. We won't go that far back. First off, I will be making forward-looking statements. We will be making forward-looking statements, so please see our recent SEC filings. Neurocrine's been around for 32 years. We were founded as a neuroscience company, and we were founded actually as an expansive definition of neuroscience, which exists still today. We've stuck to our knitting. That expansive definition is that we are in neuropsychiatry, neuroendocrinology, neurology, and soon to be neuroimmunology, and that's how we define it. We have programs currently in all of those areas, both preclinical and clinical, at this point. So Neurocrine, as I said, has been around a long time. We...
I'm gonna start out with something that we're particularly proud of, and that is the fact that the original business plan, 32 long years ago, had in it that we were going to discover and develop the first CRF receptor one antagonist, small molecule, orally active antagonist. Those had never been created before. It takes a while, and come the very end of this year, we hope to get an approval for the very first orally active small molecule CRF antagonist for the treatment of congenital adrenal hyperplasia. So I think that's emblematic of the kind of grit and the kind of tenacity that it takes in this business, and I'm very, very proud of the company for having that. But as I said, we are in multiple areas, and the CRF receptor antagonist, that's neuroendocrinology.
We have another neuroendocrine drug that is on the market that we partnered just as we began phase III with AbbVie, and that was another molecule that was discovered and developed at Neurocrine by Neurocrine scientists, and that's for women's health in the treatment of endometriosis and uterine fibroids, and then we obviously have, and I say obvious, but we have our drug that we discovered, developed, and commercialized on our own. Now we're in the 7th year of commercialization, INGREZZA, for the treatment of tardive dyskinesia, and this year we're giving guidance that we will have an excess of $2 billion in sales, so between $2.25 billion and $2.3 billion, so along with that, we have a deep portfolio of drugs.
In the clinic, we have approximately 15 different clinical programs spanning about 11 different therapeutic therapies, and we have double that number that are preclinical going on in the company. So we have traditionally been a small molecule company all these years. But several years ago, we decided that if you're going to be the leading neuroscience company, which is our goal, in the 21st century, you have to be able to make molecules that are going to potentially be curative of CNS diseases. And to do that, you have to enter into the realm of large molecules in there, whether it's antibodies, whether it's proteins, peptides, or gene therapies.
So after several years of building those aspects of our R&D organization up, you're going to see next year that our first large molecules, our biologics, are gonna be entering the clinic. And also, you're going to start seeing that gene therapies out of Neurocrine are going to be entering into the clinic. So it's a real transformation of the company. Doesn't mean we're abandoning small molecules. Small molecules are always going to be a bedrock of Neurocrine. And because we have such a deep portfolio in neuropsychiatry, I don't know of a psychiatric target yet that demands a biologic, and that's still going to be small molecules that are gonna be there. We're extremely well capitalized.
We have nearly $2 billion of cash in the bank, and so we're 17 years ago we had a market cap of, I would say about less than $100 million. We had a share price of about $1.87. And here we are today and, you know, with a, depending on the day, a $13 billion-$14 billion market cap, and depending on the day, you know, $120s to the $150s is where we trade. So it's a company that has matured over that period of time.
We don't look anything like we looked even five to seven years ago, and we're the growth that we've seen in that five to seven years. I am certain we're going to see just that same type of growth in the next five to seven years.
... Great. You talk about the differences over time, and, I don't know if you knew this, but actually when I started on the sell side 15 years ago, Neurocrine was one of the companies that I helped cover. So it has changed quite a bit. But before we dive into the different programs, maybe a couple questions for Kevin and Kyle. And Kevin says he's trying to find some time to step away from the CEO role, but we know he can't get enough of it. And certainly done an amazing job. So Kevin, over your tenure as Neurocrine CEO, what are you most proud of? And Kyle, what are you most excited about for the future of Neurocrine?
Most proud of, obviously, the patients is number one that we're able to help now. As I said, we have discovered and developed medicines at Neurocrine that are on the market. That's exceptionally gratifying, especially when you get to talk to those patients who've been treated with those. Second is gotta be the people that you work with, and by the people, I don't just mean how much you enjoy working with them and everything, but you see the growth in people. We have employees. Every quarter, we celebrate employees on their, you know, 3rd anniversary of with the company, 5th anniversary, 10th, 15th, 20th, 25th anniversary. We have a lot of those employees that have been with us for 20+ years, and to see how they've grown in their careers has been really, really gratifying.
Have loved that. Third, I guess, one of the things that I'm absolutely most proud of the company is the way the company carries itself, and I mean the whole company, and the way that we present ourselves publicly, privately, with all the stakeholders in the company and all our collaborators. I like to after this past weekend, I like to think that we're the Sahith Theegala of biotech. Those of you who aren't golfers, look at a guy in the thick of winning the biggest tournament of his life, and he called a two-shot penalty on himself that not even replay would show and took him out of contention. That's Neurocrine. We hold ourselves to a high standard, and I appreciate that the street holds us to a high standard on that.
That means a lot to us. And so we when we have a molecule, when we have a program that, the data comes out, and no matter how much it hurts, we don't sugarcoat it, we just call it, and we just say, "Okay, this is done. And, you know, remove it from your model. We're not going forward with this." And we do that almost on a weekly basis inside the company because we have so many molecules, so many programs, so many opportunities, but we keep the standard very high, and I'm really proud of a company that can do that.
In terms of the future, you know, it's hard to think about the future without thinking about the past a bit, and Kevin described the history of Neurocrine. It's really quite impressive, what he's been able to do here at Neurocrine. I think part and parcel that he's left quite a legacy for us all to continue and good momentum to build on. So what excites me about the future, I guess at a high level, you know, I start with thinking about patients, and in my early days at Neurocrine, we dreamt, Kevin and I dreamt about having a deep and diversified portfolio. We didn't have that early on, and what I see today is we do have that diversified portfolio, that pipeline diversified by stage and therapeutic area.
In some cases, it's managed through risk, through some unique business structures we have with some of our collaborators. The pipeline that we have today, it's built to be sustainable for the first time ever and deliver really consistent flow of data, looking forward to year after year into the future, and it's sustainable now for some of the things that Kevin mentioned. This R&D transformation that's underway right now, moving away from externally derived programs to internally discovered programs, small molecules to diversified modalities from symptomatic to disease modification therapies, curative therapies, and working more on finding the right balance between validated and non-validated targets. These are all things that are well underway and will continue to add to our portfolio over time, so the pipeline, the profile of the pipeline is something that I'm really excited about for the future.
That's at a high level. If you want to drill down to some more specifics, if you just think about INGREZZA, that's something that we talk about all the time at Neurocrine. Here's our growing blockbuster. We've increased our guidance this year to $2.25 billion-$2.3 billion. There's 14 years of patent life still on this medicine. 80% of the patients out there with tardive dyskinesia still aren't getting a VMAT2 inhibitor. So a lot more opportunity for us and work for us, quite frankly, to reach all these patients, but really excited still about all the growth that's still left in INGREZZA.
And then coming back full circle to CRF and the opportunity to treat many thousands of patients with CAH, as a potential second blockbuster for us, another leg of revenue growth for the future is quite exciting as well, considering our history here. And then, just to round out the excitement of single assets and portfolio programs, we've got a number of phase threes that will be starting next year, NBI-845 and major depressive disorder, NBI-568 in schizophrenia, and a lot of data readouts of assets that are in phase two and phase three between now and the end of next year. So a lot of exciting things to be excited about for the future. I think I just end coming back to Kevin's legacy.
One of the things I'm really looking forward to here shortly is one heck of a retirement party here for Kevin. I know that's something that we're all been planning for a while now. Certainly, being able to celebrate with him is-
Oh, fun!
It's gonna be a lot of fun.
Great. Well, let's start with your M4 program. The question everybody wants to know is, you know, given the lack of dose response, what gives you confidence in NBI-568, and especially at the 20 mg dose?
Yeah. So let me, let me just back up a little bit. So we have a muscarinic four receptor agonist, and it's NBI-568 or 568 for shorthand. Two companies, Karuna and Cerevel, did really outstanding jobs going before us with their muscarinic agonists. Karuna was the one who has taken the lead. Their compound is in FDA review right now. Cerevel, later this year, is gonna read out phase III clinical data on there. And then there's us, who just read out our phase II data that we come out. It's really interesting. Three companies wanting to affect the muscarinic four receptor, and we're all coming at it very, very differently. So Karuna has a pan-muscarinic agonist, meaning it hits all the muscarinic receptors, agonizes all of them.
And so they coupled that with. They added a drug called trospium, an approved overactive bladder drug, that doesn't go central, works purely peripheral. It can't get into the brain, and it's a pan-muscarinic antagonist, so it hits all of the muscarinics. So it basically protects the patient, the hope is, from all the other non-central receptors, which can cause a lot of side effects, and still allow the central agonistic effects of the drug. That's how they've come about it, putting two drugs together. When you look at Cerevel, they've come at it by having an agonist that actually needs the endogenous ligand in order to be, which is acetylcholine, to be present in order to show its activity.
We're the only one that came at it with a highly specific, it only binds to M4, and it's called an orthosteric agonist. Just it's binding to the M4 receptor, you don't need acetylcholine, and you then agonize that receptor and turn it on. And so leading to what they, I think, showed quite nicely is that you lead to an improvement in the symptoms of severely impacted schizophrenic patients. So we ran our phase II trial, which was a signal finding trial. We were looking with a variety of doses and with a fairly complicated trial design that we went into this into this patient population with.
And what we fundamentally went in with pretty good conviction was that of all the doses we were looking at, 20 mg, 40 mg, 60 mg , and then we did 30 mg given twice a day. All of our preclinical work that was done there. And I should give a lot of shout out to Sosei Heptares. Nxera is now what they're called, who we licensed this compound from. They developed the molecule. They, they created the molecule. It was discovered there. We did a deal with them on a number of muscarinic compounds. They did an outstanding job. In preclinical models, it pointed towards blood levels that our 20 mg dose in humans would achieve would be basically the sweet spot that we would find with efficacy.
In a phase I study, where there was a cohort of the phase I patients that there was a translational medicine aspect added to that, an EEG study that showed that there's activity, then that central activity would be associated, would be highest with the 20 mg dose. So we went into this knowing 20 mg is going to be the low end, the anchor that we go to. We want to see what happens at higher doses. We wanted to know what kind of safety margin would we actually have in the patient population. We also wanted to know: What is BID versus once-a-day dosing? So you're bringing in very ill patients. You're already gonna deal with a portion of them on placebo.
Those that you're giving drug to, you better have an efficacious dose that you feel good about in efficacy, and I don't think we communicated that really well out there to begin with, that we had a decent degree of conviction as much as you can have from preclinical and phase I studies about that lower end of the dosing paradigm, so that the results came out, and sure enough, that 20 mg dose performed exceptionally well on efficacy, and I'll talk about that in a moment, but as importantly, on safety, because that's huge in the psychiatric population. The most used drugs for schizophrenia, major depressive disorder, they are not always, actually, they're not the most efficacious that's available out there.
They are, however, the safest that are out there, and so safety is a high bar. So we read out with the 20 mg being a very efficacious and well-tolerated drug. And then the other doses, the higher doses, the 40, the 60, the 30 BID, while efficacious, they didn't hit statistical significance. They weren't as good in showing the response as the 20 mg dose did. That's not unusual to have this atypical dose response. Some people call it an inverted U dose response, others call it a flat dose response. I call it just atypical. It is not, it's not this lower dose gives you this response, you go up to an intermediate dose, it gives you a better, you go up to a high dose, it gives you better than that. It's atypical.
Atypical, except in psychiatry. That's where you see these kind of atypical dose responses quite frequently. Even one of the other muscarinics, Cerevel's, showed the same thing. The higher dose was not as efficacious as the lower dose that they took in to phase III. So the confusion here is, and it's not confusion, it's, you know, I think the investment community wanting to understand better what is going on at those higher doses, and it comes down to, if only the lower dose and only one of four doses that you studied is active, how can you be certain that that isn't due to luck or chance, that that really is what you see there is really the true efficacy of that drug? So we've had the data now for a couple of weeks.
We've picked at it every which way you can go to. So let me try to answer why that 20 mg dose is absolutely an efficacious, safe, and competitive dose that we're taking into phase III. Number one, sure, on the PANSS score, it has a nice p-value of 0.02, but that p-value is backed up by an effect size score. The effect size, to put it simply, says how much of that that p-value is due to variability, and you got lucky on the variability? Higher the p-value, higher the effect size, the more you know that's not true, that variability is taken care of there. Our effect size was 0.61. Now, that's double, actually, of what most of the antipsychotics that are on the market these days is, that 0.61.
Third is, there were other endpoints that we followed throughout the study. Those other endpoints were Clinical Global Impression, change. That was stat sig. The other endpoints were looking at positive and negative symptoms with a variety of scales. P-values that are positive, less than point zero five. It hit on all of those things. Okay, let's step back for a second. Let's stop talking about just... Okay, that, that's impressive. It's hitting on everything. Everything's holding together. We see in psychiatric studies, sometimes a real big over-enrollment at one or two sites can lead to a spurious result. No, we did this as 15 sites that we did this across, and we were distributed pretty evenly, that 20 mg dose, throughout all 15 sites. Okay, but still, you could have one or two or maybe even three sites we've seen before, where the...
They carried the day, just at a couple of sites. For whatever reason, the raters there, something about the patient selection, they were better than other sites, but for those one or two sites, your study would have failed. No, the 20 mg actually performs pretty evenly across all of the sites, so you can tick that one off of there. Well, granted, there was a really low dropout rate here. I think it was 5% in the drug-treated, about 4.7 or maybe 4.5 in the placebo. But could it be that the placebos that dropped out, although there weren't a lot of them, could it be that they were high responders, they dropped out, and so you took them out?
Or in the 20 mg , the rest, the dropouts there were the really low responders, so by taking them out early in the trial, that didn't work against you. Actually, it's just the opposite, so that those dropouts worked against the 20 mg dose, and yet the 20 mg dose still had such an outstanding result there. So we're going to be presenting this more wholesomely, as we're pulling, because this is all very fresh, and pulling these analysis and others together, in order to present publicly, but also to be able to sit down with the FDA, because we look forward to their feedback that they're gonna give us at an end of phase II meeting, that we hope to have by the end of this year and design the phase III clinical trials.
We learned a lot in this study. Make no mistake, we're not gonna do such a Byzantine trial design in phase III that we did in phase II. Phase III is we know what leads to success in psychiatric trials, particularly schizophrenia trials, one-to-one, placebo to drug-treated groups. Very simple. Ask very few questions of your trials. We will power it appropriately. We know the best sites to go to, and so we really look forward to taking this into phase IIIs, and with a high degree of confidence. And at the end of the day, the worst thing you can say about that 20 mg dose is 40 mg and 60 mg . Those doses didn't show as high effect as 20 mg did.
Just to clarify on the dosing, though, 'cause one question that's come up a lot is, you talked about 20 on the lower end, but I guess for the study, why didn't you look at even one more dose lower?
Because then we'd have to take away one of the things that we wanted to really explore, which is: How high can we push this dose of this drug to see what its tolerability looks like. It was already a five-arm study including placebo. Now, if we were going to look at a 10 mg dose, then we would have had to get rid of something else, and we really wanted to know. You don't know your drug until you've used it, you know, over a period of years in the clinic. We didn't know if BID could be better or as good as a QD dosing, so we would have had to drop some of those out to then go lower. Yeah, 20/20 hindsight, yeah, with that, but that wasn't a fundamental question that we were looking at in this.
It was first and foremost a signal-seeking phase II study. We had a pretty damn good degree of confidence that 20 mg is gonna give us a signal, so that's what anchored this.
Given the placebo-adjusted reduction in PANSS and the effect size are lower than the earlier KarXT or emraclidine studies, can you just talk about what gives you confidence that NBI-568 will be better than the others or?
Yeah. So there's a number of things that one can look at that would be competitive with this. Because what you do care about is: Are you gonna be competitive within the muscarinics? If you look at KarXT, it's BID dosing. It has a food effect, so you have to eat within two hours of each one of those doses. And tolerability is a real issue with the GI problems. Putting in that peripherally active antagonist drug with their active drug, it really did do a very good job of ameliorating a number of their side effects, but not completely. So it's about 20% of their population has some significant GI problems. I think that we differentiate on safety really, really well. They are very efficacious. I don't disagree with that.
You know, one thing that's been brought up to us is because we show, and I left out why to believe in this drug. It's a six-week study, and when you look at the six-week study, you see the 20 mg dose starts to separate from placebo as early as week one. It is statistically significant separation in weeks three, four, five, and six. Others have routinely used week five instead of week six to take the primary endpoint. We took week six. If you look at week five, and it's on our website, and it was presented there, then we stack up at week five, looking very similar to KarXT. It's just where you decide to anchor the endpoint.
The little uptick in week six there is just the variability you see in these kind of studies. With emraclidine, which is the Cerevel compound, their phase IIIs are gonna read out later this year. So we look forward to taking a look at them. Their phase Ib that they did prior to starting their phase IIIs, that looked very nice, a well-tolerated drug. I'd say we're right there with them from an efficacy standpoint. And so we'll see how theirs works out. The only thing I would say, and I... Again, I think that those other two companies, Karuna and Cerevel, did excellent jobs, and they have drugs there.
But when you look at Cerevel's, the concern that's been brought up, and it's one of the few concerns you can bring up at the drug, is that its phase Ib study had a placebo response of only a six, just six points. That's really low in a schizophrenia trial. And it's odd to hear a company say: We're happy that we had a higher placebo response. But we had a placebo response in our study of 10. That makes you feel good because phase III trials in schizophrenia usually have placebo responses in the 10 to 12 range. We're in 15 sites. That makes sense. So we were glad to see that. So our separation from placebo, if you look at our change from baseline, so don't take a placebo adjustment, so look at what the psychs usually look at.
How well did the drug do just from straight change from baseline? It's 18.5 points. That's a huge change from baseline. And then it's about seven and a half to ten, depending on which time point you look at, week five or week six, as the placebo-adjusted. Emraclidine only had that six-point placebo range, so they have a bigger change from bigger placebo-adjusted. Change from baseline is about the same. You would expect in phase III, they're going to have an uptick in that placebo group. I would still expect them to separate significantly from that, but placebo's going to go up at a higher slope than is going to be the drug group. You can look at that from 20 years of drug development in schizophrenia and major depression.
You mentioned that you have the highest conviction in NBI-568 amongst your muscarinic candidates. How do you think about the prioritization of indications across M4 versus M1/M4 mechanism?
I'll let Kyle talk about that.
So it's, it's a great question. I think that where we start today, we have that 20 mg dose in schizophrenia, so we think about standing up the registrational program as early as we can. I think right now we've got our eye on the middle of next year, and we'll have that study up and going. We had to stop at the FDA and have the end of phase II meeting to agree on the plan there. Once we get that study up and going, or the registrational program, we'll look at. By then, the next few months, we'll know what we wanna pursue for a second indication, and we'll get that up and running subsequent to the start of the phase III schizophrenia program. And on the heels of that, we do have other muscarinic agonists in the portfolio.
We've got a M1/M4 dual agonist that we've named NBI-570. We've got another M4 preferring agonist, that's NBI-569, it's a little bit of M1 on that particular molecule. And then we've got a selective M1 agonist as well, that's a little bit earlier in phase I development still, that's NBI-567. These are all things that we're currently weighing as we get the data in from the phase I studies that, again, that are ongoing. I think what's most interesting right now as we stand here and talk about the muscarinic is the dual agonist. That's a really interesting profile that has equal potency and efficacy across M1 and M4, and potentially bringing that forward into a patient population next year.
What I would say is that for those of you that are just sitting there glazing over of M1s, M4 is, you know, peripheral, central. What you wanna stay away from is hitting M2 and M3. Those are the ones you wanna stay away from. You wanna stay away from them peripherally. You would like to look at M1, M4 in the CNS. That's those are the two that all the years and years and years of work that's been done with this, with this receptor system, it all points you to M1 and M4. And clearly M4, on its own, as we've shown, now and Cerevel shown in a different way by tickling the receptor, M4 alone is very good at ameliorating the symptoms of schizophrenia.
Great. You know, the company said that NBI-986 is a better version of Artane. You know, Artane has some tolerability issues and impacts cognition. So what gives you confidence in this target in NBI-986?
You know, I think it is worth reminding folks we've been in this space for over a dozen years, and we've tried to play both sides of the target of the muscarinic, and by that I mean looking at both antagonists as well as agonists. We've had much more luck internally with selective antagonists versus the agonists, and hence our partnership with Sosei Heptares, now Nxera, on the agonist side of the equation, looking at M1 and M4. So for our M4 antagonist program, what we've been able to dial in is very exquisitely selective M4 antagonist. And why we think that's important is we believe that particular subtype, in particular, antagonizing it, is representative or responsible for the positive results that you get with Artane in terms of controlling some of the movement disorders, ranging from Parkinson's disease, tremor to dystonia.
The problem with Artane or trihexyphenidyl is that it hits all the subtypes of the muscarinic. It's like the counterpart of Xanomeline. It hits M1 through M5 from an antagonist perspective, and we believe that the M1 antagonism from Artane is the source of the cognitive impairment we see when using that particular medicine. It really hampers its use more broadly. So by looking at only M4, again, it's an interesting story. There's similarities here. We can look at just the movement disorder component, the benefits of Artane, and hopefully remove some of the side effects that are associated with the currently approved medicine.
Great. Well, less than one minute left. Last question. I'll just open for you. Say whatever you'd like. I think this is your last. Anything you wanna say to the street or-
Yeah.
For your-
From now on, hotel rooms are places to sleep and not have meetings in for the rest of my life. So I'm looking forward to that. No, I just wanna thank so many of you and hopefully people who are going to be listening to the webcast for all the support, guidance, and advice. So thank you.
Great. Looks like we'll leave it there. Thanks so much for your time.
Thank you.