Welcome everyone. This is Josh Schimmer from the Cantor Biotech Equity Research Team. We are very pleased to have from Neurocrine Biosciences, Matt Abernethy, Chief Financial Officer, Eric Benevich, Chief Commercial Officer, and Todd Tushla, who heads up investor relations. Matt, maybe you just want to set the stage here. Give us a snapshot of where Neurocrine is today, and if there are aspects to the story that you think investors are really missing or not appreciating.
Well, first of all, thanks for hosting us. Always good to be with you, and good to see your name is spelled Joshua and I am Matthew, so we got our formal names going on today, so that is always a good thing. We will be making forward-looking statements and so we direct you to our SEC filing. We have a lot of great things going on at the company. It is amazing to think just two years ago, we were a single product company. Now we are a multi-product company. Going from one product with INGREZZA to now INGREZZA, CRENESSITY, and VYKAT XR.
Last quarter, we had about $1 billion in sales. And we pinch ourselves and find ourselves quite fortunate to have three growing brands, three brands that are helping many patients. And I would just say kudos to the teams that have been involved in that, and being able to help so many patients across these different therapeutic areas. In addition to that, if you just rewind three to five years ago, we probably had three pipeline programs. Now we have close to 20.
You think about where is our pipeline, and you stack that up against anybody else in the industry. I do not know if there is anybody that has a broader, bigger pipeline from phase I to phase III than what Neurocrine has. And I think that is reflective of the strategy that the team has laid out in terms of investing in early-stage research, that is now allowing us to put new programs into the clinic. And that spans psychiatry, that is our later-stage programs, neurology, immunology, which we will touch on more later this year, and then also endocrinology. A lot of great things going on in the pipeline. Of course, the headline are there are two major phase III programs that we are going to have next year. One of them is osavampator, which is an AMPA potentiator that is being studied in major depressive disorder.
And then we also have direclidine, which is a muscarinic program that is focused initially in schizophrenia. That data will read out in 2027 and 2028. Those are transformational programs for our company. We are looking forward to executing those trials and getting to that data. Then lastly, strong financial position that gives us a lot of flexibility. I think you mentioned what are investors missing or maybe might be overlooked, and I know today it is important we will get into nuances of each of our brands. We will get into nuances of our pipeline program, and it is important for investors to understand those nuances. But I also would encourage folks to take a step back and look at Neurocrine.
In the elevator after our meeting earlier this morning, I was riding up and somebody says to me, "Wow, I have been an investor 15, 20 years ago in Neurocrine." And he says, "Now you are a big, real company." And I think that is an appropriate perspective. We have three products. We have durable top-line growth, durable cash flow, and we are working to have a durable, sustainable R&D engine. And I think those allow itself to have us valued in the long run as an enterprise, not as a single product company, not as a binary outcome from a data readout, but we are a company striving to help as many patients as possible, and that is the mission that we are on today. We are looking forward to being here, and we will take your questions however you want to go, Josh.
Super. Thank you. Well, why do not we begin with INGREZZA? What is probably so remarkable about INGREZZA, it is kind of the product that keeps on giving growth, right? And becoming such an important part of Neurocrine, but it is also a product that is, for a product that has been on the market for so long, there is still so much to talk about, right? Maybe we can start with the recent sales force expansion that you have completed and how you think that positions now INGREZZA in the coming quarters and years, especially as you undergo some of the dynamics we will talk about next under the IRA.
Yeah, I guess I will take a crack at that. Hi, everyone. I am Eric, and that is my full name. For those of you that may be a little bit less familiar with INGREZZA, when we think about INGREZZA, we primarily think about the tardive dyskinesia indication. That is the vast majority of our business. It has been on the market for nine plus years now, and Josh, as you were saying, it keeps delivering robust growth. In fact, in Q2 of this year, we reported a record NRX or new patient starts. We also reported record TRX, which is unusual for a product this far into its life cycle. Though I will say that it has a long runway ahead with exclusivity out to 2038. So if this was a baseball game, I would say we are in the fourth inning or fifth inning maybe.
But bottom line is that this is still a rapidly growing category, the tardive dyskinesia market. We're on a pace this year for growth in the mid-teens. We expect to be able to continue to deliver robust growth going forward. You were talking about 2027 and beyond. One of the investments that we recently made was an expansion of our field sales team, and that was completed at the end of Q1, and the expanded team rolled out in Q2 of this year, so it's relatively fresh. I would say that the expanded sales force is a contributor to the momentum that we've seen, but certainly not the only investment that's delivering these results. This is the most recent expansion, and as we were chatting about earlier, over the years, we've expanded our field sales team four times.
I think that's really in response to the growth of the category, the growth of the prescriber base for VMAT2 inhibitors. At the time that we announced this most recent expansion last fall, we said that the base of VMAT2 writers had grown by 30% over the prior two years. In some ways, every time we expand our team, it's to keep up with the growth of the category to make sure that we're calling on the prescribers that are treating these patients with diagnosed or non-diagnosed tardive dyskinesia. We estimate today that the size of the prevalent population is at least 800,000 in the U.S. Roughly half of those folks have been given a diagnosis to explain their uncontrolled abnormal movements. Yet only about 10% of TD sufferers are currently being treated with one of the two approved VMAT2 inhibitors.
So there's a lot of headroom from an organic growth perspective. Certainly, the investments that we make, whether it's in sales force or whether it's in branded DTC, medical education, omni-channel marketing, they all work together to continue to drive recognition, diagnosis, and treatment with INGREZZA. So, we feel really good about the first nine years of the launch. Our aspiration is to continue to drive diagnosis and treatment with INGREZZA because there's a whole lot of people still that could be benefiting from treatment.
What was the extent of the sales force expansion? It went from when- to- when, and when do you expect that to really start to reflect in sales? Is it third quarter or later?
Yeah. I would say, based on our historical experience, it does take a couple of quarters to, I would say, have the sort of tangible full benefit of a sales force expansion. The TD market's a little bit different than other categories within psychiatry or behavioral health. Our folks, they have a little bit of a broader scope of role than maybe what you see in antidepressants or antipsychotics. They do a lot of disease state education. They really help educate the providers, especially those that are earlier in career or newer in behavioral health, to understand drug-induced movement disorders, to distinguish TD from other hyperkinetic or hypokinetic movement disorders. Certainly educating them on VMAT2 inhibitors and INGREZZA in particular. So it takes a little bit longer to get up to speed when you're coming into this therapeutic area.
I do think that some of the momentum that we saw in Q2 was due to the expanded sales team. I also believe that we'll see the full impact of the expansion as we exit this year. So ultimately, our learnings as we go forward is each time we do an expansion, I think we get a little bit better at telescoping that time from onboarding to effectiveness. The way that we look at the impact of the expanded team is their ability to drive new patient starts. So it's really about NRX. Ultimately, that's one of the reasons that we have a lot of confidence going into next year.
So $2.85 billion is the midpoint of our guidance range this year, and that reflects 13% year-over-year growth. Included in that is a 4% price headwind. So when you put in context how is INGREZZA growing today and how's the overall TD market growing today, our underlying volume is in the mid to upper teens, and that's quite significant when you think about how promotionally sensitive the market is to the investments that Eric has been alluding to. So we continue to invest behind INGREZZA as a growth engine. We understand it's going to be profitable to us all the way until our IP exclusivity window ends in 2038. There'll be some different nuances, and I'm sure we'll talk through those different chapters in terms of price.
Why don't we do that now? That's a perfect segue into 2027, 2028, 2029, because there's a unique shift each year, whether it's catastrophic exposure, whether it's AUSTEDO being negotiated, whether it's INGREZZA being negotiated. Take us through how you anticipate each year playing out, primarily with regards to price headwinds and access.
Yeah. Access is incredibly important in this class, and that's something that we found last year once we were added onto formularies. We went from about 30-some percent to about 70% coverage in Med D plans, and I think that's part of the reason why you're seeing stronger volume growth this year as Eric and I have been alluding to. So preserving access is incredibly important. The questions we get around 2027 have to do with our competitor has gone through a negotiation with the government where there's a defined MFP, and they're going to be covered by 100% of plans by statute. The question has been, what is going to happen to INGREZZA within all of these formularies?
Fortunately, where we sit today, we do feel as if we're going to be able to maintain coverage at the same levels that we have today, and that was incredibly important strategically as we negotiate or as we navigate 2027 and 2028 before our official IRA MFP moment. So how to think about 2027, there's two price headwinds. One is statutory, where you go from a 2% statutory rebate to a 5% statutory rebate, and that's because we have the small biotech exemption and the phase-in of the catastrophic coverage rebate. So that's a direct price headwind. The second is to maintain that access, we have had to offer some modest rebates that would allow us to preserve access.
But when you take a step back and you think about the underlying volume in the market, what we expect to achieve, we absolutely expect to have strong growth still next year. It will just be a bit offset by these pricing dynamics that we highlighted. In 2028, we do have another step-up of statutory rebate and price going from 5% to 8%, and that's by statute, but don't see any other price headwinds at the moment. Then we get to our IRA moment in 2029. Fortunately, our IRA negotiation was pushed out two years based upon qualifying for the small biotech exemption.
In addition to that, we have a defined range of what the potential outcome of negotiation is between 25% discount to 34% discount from a metric called non-FAMP. So there will be a price impact in 2029. There will likely be a dip in overall revenue for INGREZZA as you transition from 2028 to 2029, but still a very profitable brand and growing from there.
Just one clarifying point. The statutory rebate that Matt was describing applies only to our Medicare business, which is about two-thirds of our volume. It goes from 2% this year to 5% next year to 8% in 2028. That is across all of the Medicare business.
Got it. Did the 4% price headwind in 2026 include that kind of 2% catastrophic exposure you factored that in?
In 2025, it was 1%. Then in 2026, it was 2%. So it did contribute about 1% of that year-on-year price- impact. But the larger price impact this year had to do with gaining formulary coverage in the middle of 2025.
kind of inferring, it sounds like 2028 may come in again around 4%, maybe even a little higher if you've got that 3% step-up plus some discounting to stay on formulary.
In 2028?
2027.
Oh, 2027. Yeah, we haven't given the formal guide. We'll see where CMS lands with formularies and finalize that, and we will give an update either later this year or as part of our guide early next year.
When you get to 2029, as you enter into that 25%-34% discount to non-FAMP, I guess first, as we clarified this morning, that is actually versus 2021 non-FAMP with some adjustments. At that time, the catastrophic obligation will go away as an offset. Are there other offsets to consider? Other reimbursement dynamics that will kick in in 2029?
What goes away in 2029 when you have a negotiated maximum fair price for Medicare is the catastrophic contribution like we described that is being phased in now, that goes away. Any voluntary rebate agreements go away. Any contracting that we do today, that goes away.
That's quite a potentially meaningful offset. That 2029 impact, even with that, you don't think volume growth can keep that franchise flat that year?
It's hard to sit here today and give a 2029 guide. I don't want to dismiss the impact of the negotiated price.
Got it.
We will get to that being known actually in 2027 by the end of next year. Once we get through that negotiated price window, hopefully we'll be able to provide a bit more color as to what to expect in 2029. There is also an element to that it bleeds into best price for Medicaid and a few other dynamics. It's something that we look at as it will be a little bit of a wound, but it's not a generic-like event where you have to completely right-size your business.
This is something- as we've thought about sales force investments and positioning ourselves for the future, continued investment behind INGREZZA, continued investment behind our VMAT2 franchise, including our follow-on molecule, which we'll have some data on next year, which we would intend to take in as a long-acting injectable. Our view and one of our strategic pillars is to own and continue to dominate the VMAT2 class, so you do see some aspects within our pipeline that will point us there over this time horizon. I know the nuances of this might be difficult to grasp I look at it
You do a really good job explaining it.
Well, I look at it as, man, we're quite fortunate to have a medicine that's growing in an underlying market like this with INGREZZA. And it's also nice to have other products like CRENESSITY and VYKAT that contribute to the growth. And by the time we get to 2029, Josh, I think the main question will be, what's the next major growth chapter for Neurocrine? And I think with the pipeline readouts and the continued evolution of our other brands, that story will become clearer as we get there, and we have a lot of confidence in the future.
Are there any spending offsets in 2029 that can help protect the bottom line and continue to grow the bottom line?
I think there's two pieces. We'll always look at our cost structure to make sure it's aligned with the opportunity that we have on the top line. With that said, we do have some meaningful data readouts over the coming year or two. In particular, if osavampator is positive and we're required to build out a primary care sales channel, for example, those are investments we're going to be very glad to make, and there might be a window of time where we forsake operating margin to position ourselves to drive longer-term shareholder value. We will look at cost structures and making sure they're aligned appropriately to the opportunity. We do have a lot of interesting aspects that could allow for quality investments over the coming years.
Josh, I would just say that the great thing about our late-stage pipeline, whether you're talking about osavampator in major depressive disorder or direclidine in schizophrenia, really nice synergy with our existing footprint in psychiatry. We've established ourselves as a player in psychiatry. Looking forward to the opportunity to bring one or both of those medicines to patients towards the end of the decade.
Where do you envision the role for a VMAT2 long-acting injectable? What kind of market share do you anticipate it being able to generate compared to INGREZZA?
Yeah, the way that we are thinking about the opportunity for a long-acting injectable is if you think about patients with serious mental illness and in more particular, patients with schizophrenia or schizoaffective disorder, there is a portion of that patient population that are really non-compliant with oral medicines. There are several brands of long-acting injectable antipsychotics that are billion-dollar drugs as a result. Some of these patients have tardive dyskinesia. In fact, there is likely a higher proportion of them that have tardive dyskinesia. By the time they get to a long-acting injectable antipsychotic, they have likely gone through several different oral medicines to get there. One of the risk factors for TD is the number of prior antipsychotic treatments and the potency of those drugs.
We know that there are some patients that are non-compliant with oral medicines that are on long-acting injectable antipsychotics, and as a result, are not getting treated for their tardive dyskinesia. Our aspiration was to develop INGREZZA as an LAI formulation. Unfortunately, due to the characteristics of its profile, it is not really compatible with a once-monthly or less frequent injection. NBI-'890 is, and so that is one of the aspects of the product profile that we are excited about currently being developed as an oral form, but working on the LAI version of it so that we can offer the opportunity for those patients that are not compliant with oral medicines to still get treated for their TD.
In terms of the type of penetration you might be able to achieve based on those dynamics?
Yeah, it is hard to estimate right now. We view it as an incremental opportunity, so not necessarily sort of cannibalizing the existing market. These are patients that are not being treated because of their poor compliance with oral medicines.
But when you say incremental, often interpreted as just modest, is that what you are implying? Or incremental add-on, but a substantial add-on to existing.
Yeah. We can get a little bit more detailed when we get further down the road. But yeah, the majority of the market opportunity is for the oral form.
Okay. It was a wonderfully crafted response email from Kyle to the Prader-Willi community. Very thoughtful and very attentive to the needs of patients. I think one of the items that came up was a commitment to continue to explore VYKAT XR in the context of potential cardiovascular risk factors. How do you intend on exploring that? Do you have particular trial designs in mind or particular questions you are trying to answer that can help safely position VYKAT XR in parts of the community that may currently be very hesitant to try it?
This is a devastating disease. It really is. It manifests itself at birth and continues to just manifest itself all the way until adulthood, where many die very young. It is a devastating disease that also brings a variety of comorbidities associated with it. I think what you're alluding to, Josh, is the complexity of those patients and making sure that we can generate data in how to best help and treat and monitor those patients. So in terms of exact design of that trial, that's something that we're working with the top KOLs to help design.
What I can say is there's a formal commitment from all of those KOLs who treat many patients with PWS and are excited about exploring and providing more information to aid in who can be the best patient to select for therapy. To take a step back, Prader-Willi's 10,000 patients with hyperphagia, no approved treatment option until VYKAT XR was approved a little over a year ago. When we made the acquisition, we really had to gain conviction around three things to help substantiate the value we're going to provide. One is, was there a market need there? That was the easiest item to overcome. The second piece was does the medicine work? In what we were able to explore is we could see for a majority of patients, this medicine does work.
It does help their hyperphagia, and this is something that was meaningful to patients and caregivers. The third piece is could we get comfortable around what the discontinuation rate is? That is a combination of does the medicine work, and then also are there any safety aspects that should be considered when titrating up. These are all items that we're very fluent on or at least as fluent as you can get through diligence. The aspects of what we're talking about now in the public community, these were all items that we knew we were going to do through diligence. Some of the public letters in the media aspect have only shone a light on this, but these aren't surprising aspects for us to want to continue to invest in these programs, to ultimately help as many patients with PWS as possible into the future.
What kind of growth do you think you can deliver from this franchise before addressing the cardiovascular concerns around the product as you intend to with the clinical trial?
At the time that we announced the acquisition, seems like a long time ago, but really it was just a few months ago. We actually closed on the Soleno acquisition in May. We've had the VYKAT franchise and the VYKAT team under the Neurocrine umbrella, so to speak, for a relatively short period of time, just a few months. Ultimately, we shared our belief at that time, and it's unchanged, that VYKAT XR will be a blockbuster drug. It's relatively early in its life cycle. It's only been five quarters since it was launched. As Matt said, we estimate around 10,000 patients out there with Prader-Willi syndrome. The Soleno team did a great job of getting it off the ground and getting early adoption. There's still a long way to go in terms of reaching and educating people about hyperphagia, about VYKAT XR, and importantly, safe use.
Our goal is very simple. We want to continue to drive new patient starts. We want to help folks achieve therapeutic benefit, and part of that is managing through that titration process, monitoring for any adverse events, and getting to efficacy and benefit. Each quarter, we expect to see more patients on treatment than the prior quarter. As we shared at our most recent earnings call, the expectation is that we're going to see sequential quarter-over-quarter growth going forward. We have a lot of optimism about the opportunity here. As Matt said, this is a devastating illness, and this is a medicine that offers real benefit. We recognize that we have work to do in terms of turning that opportunity into reality.
Just a minute left, a quick question on CRENESSITY, which has had a very remarkable early launch curve. Any signs of it plateauing?
Like VYKAT XR, CRENESSITY is very early in its commercial ramp as well. During our most recent earnings call, we shared that approximately 15%, we estimate about 15% of the classic CAH population has now been put on treatment. It's very early days yet, but there's still a long way to go in terms of fully optimizing that market opportunity. I would say, you should expect growth going forward.
Yeah. Okay. No indication it is slowing at this stage?
We do not comment on a quarter in the quarter, but what I would say is that we continue to see very steady and predictable growth in terms of new patient adds. One of the great things about CRENESITY is because it is so well-tolerated, it also has really strong persistency. The numbers keep stacking up.
Excellent. I think that brings our discussion to an end. Matthew, Eric, Todd, thank you so much for joining. Looking forward to a lot more updates from Neurocrine. Thanks, everyone, for tuning in.
Thanks for having us.
Thanks for having us.
Thank you.