Neurocrine Biosciences - Q2 2023

Transcript

Operator (participant)

Good day, everyone, and welcome to today's Neurocrine Biosciences Reports Q2 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 touchtone 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, Vice President of Investor Relations.

Good morning, welcome to Neurocrine's Q2 2023 earnings call. Today, I'm joined by 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. During today's call, we will be making forward-looking statements. These statements are subject to certain risks and uncertainties, our actual results may differ materially. I encourage you to review the risk factors discussed in our latest S.E.C. filings. After prepared remarks, we will jump into Q&A. With that, I'll turn the call over to Kevin Gorman.

Kevin Gorman (CEO)

Thank you, Todd, and good morning, everyone. It's a pleasure to be here this morning. We've had a very strong first half of the year, as you can see from our press release this morning. We are raising our guidance. What was previously the high end of the range is now the bottom of the range. A very strong performance and very proud of our commercial team out there with Ingrezza. We're now set up for a really exciting H2. We have multiple readouts coming from our pipeline, led by our PDUFA date for Ingrezza and the Chorea associated with Huntington. We have a focal onset seizure and data coming out, anhedonia data coming out.

Last but not least at all is the CAH studies, both in the adult and in the pediatric population. Eiry is going to have a lot more to say about that a little later, and we'll also be taking your questions on that. Quite a bit going on here. It's all been very nice thus far. I'm really looking for the H2, and right now I'm going to turn it over to Matt.

Matt Abernethy (CFO)

Good morning. Neurocrine continues to execute with growing Ingrezza sales, improving profits, and an advancing pipeline. During the Q2, Ingrezza sales were $440 million, with year-over-year growth of 26%, driven by record new patients. Our commercial and medical affair teams continue to do an excellent job educating prescribers and developing the TD market, helping many new patients receive treatment. With a solid first half of the year, we are increasing 2023 Ingrezza sales guidance from $1.77 billion-$1.82 billion, reflecting over 25% growth at the midpoint of the range. This compares to our previous Ingrezza sales guidance range of $1.67 billion-$1.77 billion.

With growth in sales and reduced operating expenses, our profit profile improved during the quarter to over $120 million of non-GAAP net income. These profits generated strong cash flow and now have over $1.3 billion of cash on hand, providing plenty of financial flexibility to execute our strategy by allocating capital towards developing the TD market for Ingrezza, advancing our clinical pipeline, and expanding our internal research efforts. We believe this strategy will create shareholder value in both the short and long term. I will now hand the call over to Eric Benevich, our Chief Commercial Officer.

Eric Benevich (Chief Commercial Officer)

Thanks, Matt. I'm very pleased with Ingrezza's sales performance through the first half of the year. Year-over-year sales grew 26%, driven by strong prescription demand across new and existing patients. As previously noted, we anticipate a majority of growth in 2023 to be driven by the psychiatry and neurology business segments, where most TD patients receive their care. In long-term care, we are gaining traction and expect to see good growth as we continue to develop that segment. With $850 million of Ingrezza sales in the first half of the year, as Matt said, we felt it prudent to raise the guidance range from $1.67 billion-$1.77 billion, up to now $1.77 billion-$1.82 billion.

The low and high end of the updated range is driven primarily by the pace of new patient starts throughout the H2. Outside of TD, our commercial and medical teams have been preparing for the anticipated FDA approval and subsequent launch of valbenazine to treat chorea associated with Huntington's disease. Despite the availability of approved treatment options, there remains a significant unmet need across this patient population. While we have not factored in any potential HD chorea sales into our guidance, we are confident in the efficacy and safety data that we've generated with valbenazine in the clinical program, and we look forward to a potential approval in HD chorea next month. We believe we can make a positive difference for patients suffering from HD chorea. All in all, we are on track to deliver another year of record results for Ingrezza.

Growth numbers like these are especially impressive for a product in its sixth year on the market. However, the fact remains that a majority of TD patients still have not received a diagnosis or even any explanation for their TD movements.We know we still have a tremendous opportunity to help more TD patients, and hopefully someday soon, HD Chorea patients as well. With that, I'll turn the call over to Dr. Eiry Roberts, our Chief Medical Officer.

Eiry Roberts (Chief Medical Officer)

Thank you, Eric. Good morning to everyone on the call. Our clinical programs continue to make steady progress, which will lead to several important milestones and data readouts throughout the rest of this year and in the years to come. Looking specifically to the second half of this year, we will soon be reaching inflection points for a number of mid to late-stage programs, beginning with the August 20th PDUFA date for valbenazine for the treatment of chorea associated with Huntington's disease. Eric highlighted the confidence we have in the strong efficacy and safety data package generated to support approval. We've also had very good engagement with the FDA and look forward to the agency's feedback regarding the potential approval for an important second indication for valbenazine.

With respect to data readouts, we remain on track to report top-line results from 4 studies in the Q4 of this year. This includes data from both the pediatric and adult registrational studies of crinecerfont for the treatment of congenital adrenal hyperplasia. Separately, enrollment is now complete in 2 phase II studies, both of which remain on track to read out in Q4. This includes NBI-921352 for the treatment of focal onset seizure in adults and NBI-1065846 for the treatment of anhedonia associated with major depressive disorder. Turning now to our muscarinic portfolio, we're making very good progress with enrollment in the phase II study of NBI-1117568 for the treatment of schizophrenia. In addition, this year, we're advancing into phase I, our second muscarinic molecule, NBI-1117570, a dual M1M4 agonist.

These first two assets represent just the first wave of muscarinic compounds we expect to progress into the clinic over time and explore across a number of neuropsychiatric conditions. Overall, I continue to be very pleased with the progress our teams are making with the most broad and diverse pipeline Neurocrine has ever had. With that, I'll hand the call back to Kevin. Kevin?

Kevin Gorman (CEO)

Thank you very much, Eiry, and we're ready to take questions now.

Operator (participant)

At this time, if you would like to ask a question, please press the star 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 one if you would like to ask a question, and we will take our first question from Paul Matteis with Stifel. Your line is open.

Paul Matteis (Managing Director and Head of Therapeutics Research)

Hey, thanks so much for taking the question and congrats on the quarter. Hope you don't mind if I ask kind of a pipeline BD question. You've talked historically about how there's really not a lot of high-quality neuroscience assets that could kind of fit your budget, and make a kind of near to midterm impact on the top line. In the context of that, I guess, how do you think about crinecerfont and what that could do to Neurocrine scope? If crinecerfont works as well as you hope, could Neurocrine start to go into the direction of either endocrine, rare disease, and really not just be in neuroscience for the foreseeable future? Thanks so much.

Kevin Gorman (CEO)

Thanks for the question, Paul. Good morning. Kyle can add to what I would say is, but we, we do look in the endocrine space quite a bit. As you know, from discussions that you've had with Kyle and him speaking at several of your conferences, he and his team look broad and deeply into both neuroendocrinology, neuroscience, and also neuropsychiatry. It is not an area that, that we've ignored at all, that we are poised to go into if we see assets that really meet all of our criteria. Kyle, you want to add to that?

Kyle Gano (Chief Business Development and Strategy Officer)

Yeah, just, to add to, Kevin's remarks, I think what would be interesting is, with positive data with crinecerfont, it does open the door to looking at things that are later stage commercial on the endo side, which we haven't done historically. We know what those opportunities look like, and, we await our crinecerfont data.

Operator (participant)

We will take our next question from Tasin Amin with Bank of America. Your line is open.

Speaker 28

Okay, I think that's me. Hi, guys. Thanks for taking my question. Maybe just for giving us a sense of what to expect for focal onset seizures, the top-line data that you expected for Q, what should we expect, and what should we really be comparing that to in terms of standard of care to get a sense of whether or not your products could have improvement over what's currently given? Thanks.

Eiry Roberts (Chief Medical Officer)

Tasin, it's Eiry here. Thanks for that. I think I got all the questions. You were breaking up a little bit. We are very much looking forward to reading out the data from our phase II proof of concept. It's a dose-finding proof of concept study, initial phase II in focal onset seizures. Three things we're predominantly interested in the context of this study.

First of all, obviously, the initial tolerability and safety of 352 in this patient population in adults. The second is to understand the pharmacokinetic profile, which will help us with understanding exposure, response, and position as well for future dose selection in other trials, if we're successful. The third is obviously, the measures of seizure frequency. We will be looking at seizure frequency, comparing from baseline to the primary endpoint. Essentially, we look at a normalized seizure frequency over an 8-week period of monitoring. Obviously, the absolute change from baseline compared between the treatment and placebo.

We'll be interested in the number of patients achieving a 50% reduction in seizures and, from this small study, also looking at whether any patients are able to become seizure-free. Looking at the totality of that information, then obviously that will give us an indication of the strength of any signal that we're seeing, and that will position us well for future discussions.

Speaker 28

Is there any kind of minimum amount that you're looking for in terms of improvement in seizure rate that would determine a go, no-go?

Eiry Roberts (Chief Medical Officer)

Obviously, there have been a fair number of new trials in this area in the recent past that have demonstrated efficacy for new molecules in this space. We'll be interested in understanding that data, but in reality, we'll be focused on the context of our own information to understand the next steps.

Operator (participant)

We will take our next question from Chris Shibutani with Goldman Sachs. Your line is open.

Speaker 26

Hi, good morning, team. Thanks for taking our question. This is Steven on for Chris. I think historically, your team has been helpful in framing what the guidance range means in terms of some macroeconomic factors and just overall trends you see with your business. I was wondering if you could frame this $1.77-1.82 billion range, in that context. Thank you.

Eric Benevich (Chief Commercial Officer)

Yeah, I'd say the guidance range is primarily going to be driven by new patient demand. We had strong new patient demand in the first H1, and depending on the outcomes for the H2, you know, that's really going to be what the driver of that range is. It's $50 million. It's going to show a nice sequential step up in growth for the rest of the year. I would just say the team is doing an excellent job. From a macro, you know, perspective, you know, you always have a bit of room for, you know, some disruption.

I'd say based upon how our business is operating, it really comes down to get the continuance of new patient additions, and we feel, confident with the market and how it's operating to provide the guidance we provided today.

Speaker 26

Awesome. Thank you.

Operator (participant)

We will take our next question from Anupam Rama with J.P. Morgan. Your line is open.

Anupam Rama (Managing Director and Senior Equity Analyst)

Hey, guys. Thanks so much for taking the question. With the Huntington's PDUFA later this month, how are you thinking about the launch curve for Ingrezza in that indication? How do the properties of Ingrezza might shift the market dynamics there? Thanks so much.

Eric Benevich (Chief Commercial Officer)

Good morning, Anupam. Yeah, we're obviously, we're excited about the opportunity and look forward to the FDA decision coming up in August. You know, the way that we're looking at it, the HD chorea opportunity, there's still significant unmet need for that patient population. You know, we estimate around 25,000 or so patients in the U.S. with chorea associated with Huntington's disease. Only 2 out of 10 are currently treated with the only approved medicines which are VMAT2 inhibitors, the Tetrabenazines. There's still significant unmet need and opportunity there. You know, we're looking forward to getting the labeling and certainly being able to get off the ground, you know, this year. From a financial perspective, it's not tucked into our guidance.

You know, 2023 numbers would be, modest. You know, there's still significant opportunity in that, in that patient, category, and we're looking, forward to being able to help more patients, with, with valbenazine in the not-too-distant future. Stay tuned.

Operator (participant)

We will take our next question from Philip Nadeau with TD Cowen. Your line is open.

Philip Nadeu (Managing Director)

Morning. Thanks for taking our question. As we look forward to the CH pivotal data, in early Q4, we're curious to get your thoughts on the adult trial in particular. What is the protocol for reducing steroids in that, in that trial? What would you consider a clinically meaningful reduction that's likely to support approval and drive use? Thanks.

Eiry Roberts (Chief Medical Officer)

Morning, Phil. We've not actually talked about the specifics of the protocol for steroid reduction in that trial. What I will say is that in the adult phase III trial, there is a protocol, though, that guides clinicians on how to reduce the steroids in the face of the degree of androgen control that each individual patient is experiencing. That was important because of the steroid reduction being the primary endpoint of the study. And the need to control that rather than have it be a more real-world setting, which is what we believe will be used once the drug is successful and if approved.

With respect to the clinically meaningful reduction in steroid dosing level, I would say that for, as we've said consistently from the start of this phase III program, in our interactions and discussions with many stakeholders, including payers and clinicians and patients, the fact that these patients take a higher than physiologically needed doses of steroids for the duration of their life, results in significant problems of comorbidities, you know, metabolic disorder, bone issues, growth issues, et cetera. Any reduction in steroids is meaningful for individuals. In the context of the clinical trial, we obviously are trying to reduce the steroids in a protocolized way, and we will get the opportunity very soon when we read out the data, to understand what degree of steroid reduction is possible in the face of crinecerfont treatment.

Philip Nadeu (Managing Director)

Can you remind me, have you disclosed the powering of the study?

Eiry Roberts (Chief Medical Officer)

We have not disclosed the powering of the study against that primary endpoint. We do believe that the number of patients, within the trial is predominantly driven by the safety database that's needed to support the, registration. That was in conversations with the agency and regulators. That the, the trial is, very adequately powered to address the endpoints.

Philip Nadeu (Managing Director)

Perfect. Thank you.

Operator (participant)

We will take our next question from Jay Olson with Oppenheimer. Your line is open.

Jay Olson (Managing Director and Senior Analyst)

Well, hey, congrats on the quarter. Thanks for taking the question. Can you talk about the geographic scope of Neurocrine and how crinecerfont could potentially globalize your business, especially if you can leverage the Diurnal infrastructure to other assets in your pipeline beyond crinecerfont? Thank you.

Kevin Gorman (CEO)

Thanks, Jay. Yeah, crinecerfont could globalize Neurocrine. We ran this as a worldwide study, mainly based in the United States, Europe. With Diurnal as part of Neurocrine now, and with this indication being one that is basically driven by centers of excellence throughout the United States, which obviously we would commercialize here, it's also driven by centers of excellence throughout Europe. We would see this as a good entree to our to our commercial operations in Europe. We'll be we look to do a worldwide filing on this and commercialize both in U.S. and Europe.

Jay Olson (Managing Director and Senior Analyst)

Great. Thank you very much.

Operator (participant)

We will take our next question from Carter Gould. Your line with Barclays, please. Your line is open.

Leon Wang (VP and Equity Research Analyst)

Hi, congrats on the quarter. This is Leon Wang in for Carter. Question on BD. Given Dr. Roberts is going to retire in 2025, and the successor hasn't been announced yet, would you look to fill that position or have better color on that position before doing any additional BD? Given kind of the extended timeline, can you give any additional details on where you are in that process? Thanks.

Kevin Gorman (CEO)

Thanks, Leon. What I'd like to say is, is that when I rejoined Neurocrine approximately six years ago, we had two clinical programs going on at Neurocrine. We now have well over a dozen neuro programs going on at Neurocrine. Several of them are late stage, phase III programs. Nearly a dozen are mid-stage programs. Eiry has built an excellent organization here, and she's built an organization that allows for scale as these programs move forward and others are added over time. You know, you rarely get what Eiry has given us, which is two full years of notice here.

She's highly involved in our efforts to look for her replacement, if such a thing exists, and we'll be here for a really good period of time in order to make the transition as efficient as possible. Again, the entire organization thanks Eiry for that.

Operator (participant)

We will take our next question from Marc Goodman with Leerink. Your line is open.

Marc Goodman (Senior Managing Director)

Yes, good morning. Eiry, in the past, you've talked about how you've got the M1, you've got the M4, you've got an M1/M4, and you're going to be moving all three of them forward. I was just curious, kind of the, the, the strategy there. Obviously, in the press release, it talks about you're initiating phase I for the M1/ M4. I was curious about, you know, kind of the package and the whole, the whole franchise that you're looking at, and, and, and if you're going to run a, a blood pressure study with, with each one of these, or, or have you yet? Thank you.

Eiry Roberts (Chief Medical Officer)

Well, Marc, thanks. There's a lot of questions in there. Let me start just at the top. I mean, I think one of the things that really attracted us to the opportunity to partner with Sosei Heptares was the fact that they had a portfolio of really very selective different candidates that we could consider bringing into the clinic. I think it is very important, given the you know, importance that I think is going to be from this muscarinic set of pharmacology, for us to have the opportunity to explore the differential pharmacology across these different selective molecules. With all of that said, our primary focus right now is on delivery of data for 568, which is our M4 selective agonist that is currently in the schizophrenia treatment of acute psychosis trial, because obviously that is the first opportunity we have in hand.

I'm really pleased to say that our enrollment is going very well in that trial in the United States, and we continue to make really good progress. The molecule that I referred to earlier, 570, is the second of the candidates that we have in hand and are progressing, and that is an M4/M1 dual agonist, and I think that opens up the opportunity for us to look a little more broadly across different indications. We haven't finalized our indication selection yet there, as we move into phase I and understand the profile of that molecule, we'll be able to say more about that. In the preclinical setting, we obviously do have other molecules behind that, that we will intend to bring into the clinic in due course.

With respect to, cardiovascular profile for each of these, I think we need to see in the clinic first. I can't make a comment about whether or not, blood pressure monitoring will be required, or blood pressure studies will be required until we've really seen what we, get to look at in the clinic.

Marc Goodman (Senior Managing Director)

Thanks.

Operator (participant)

We will take our next question from Brian Abrahams with RBC Capital Markets. Your line is open.

Brian Abrahams (Managing Director and Co-Head of Biotechnology Research)

Hey, guys, good morning. Thanks for taking my question. You reported another good growth of another good quarter of growth for Ingrezza. Can you talk about the inventory dynamics embedded in that? Then also, I guess, what you're seeing on the ground with regards to market share versus overall market growth with your and others' efforts to identify and diagnose TD patients, and I guess where you see that going in the rest of this year and next? Thanks.

Matt Abernethy (CFO)

The bleed did occur as anticipated, but I'd say our results were largely driven by new patient additions that we saw both in the Q1 and the Q2. It's a real testament to the team, both medical and the commercial team, and how they're engaging with our customers, and then also reflective of the strong market that we have here with the developing TD market. I'm going to hand it to Eric to provide a few more comments.

Eric Benevich (Chief Commercial Officer)

Yeah. You know, we're really happy with the growth that we've seen in the H1, and obviously, our raised guidance reflects our optimism for the second half. You know, our commercial team is firing on all cylinders right now, and the, the market's growing nicely, but I'd say that Ingrezza is growing even more nicely. We've actually gained share over the past few quarters, and we continue to be very optimistic about continued growth. The vast majority of patients with TD remain as yet undiagnosed and untreated, and we're very focused on, you know, bringing this important medicine to those patients.

Brian Abrahams (Managing Director and Co-Head of Biotechnology Research)

Thanks so much. Congrats on the quarter.

Operator (participant)

We will take our next question from Brian Skorney with Baird. Your line is open.

Brian Skorney (Senior Research Analyst)

Hey, good morning, guys. Thanks for taking my question. Just really want to ask about any sort of seasonality consider going into Q3. I know Q2 is historically a big quarter for Ingrezza, and then there tends to be a little less sequential growth in Q3 and then a bigger sequential jump inQ4. So just looking for any guidance as we kind of think about the remainder of the year on, with that historical context and, and how we sort of model out the next few quarters. You know, are there any channel dynamics to consider, price changes, et cetera?

Matt Abernethy (CFO)

Yeah, Brian, I'll try to address the questions here. The first half of the year had tremendous growth. The H2, we expect similar growth. I think if you look at the range, it's $920- 970 million type Ingrezza performance here in the H2, and we do expect continued sequential growth, largely driven by new patients. Q3 has had a touch of seasonality in the past, but it's always difficult to predict, so nothing that we're going to call out specifically here on this call.

Then also from a price perspective, as I've said, previously, we do anticipate our net revenue per script to be around $5,600, which is a couple % increase, if you compare it to 2022. All feels stable from a net price perspective. It really comes down to executing and driving new patients. I think what you can hear from myself, Eric, Kevin, we feel very good with how the market's evolving, how our team's performing, and look forward to the H2.

Brian Skorney (Senior Research Analyst)

Thanks, Matt.

Operator (participant)

We'll take our next question from Akash Tewari with Jefferies. Your line is open.

Speaker 29

Good morning. This is Ivy on for Akash. Historically on M&A, I think you've commented that the high end of the range you've considered was around $4 billion, but over the next few years, I think Ingrezza will generate more than enough free cash flow to go beyond that point. What's the gating, I guess, like the gating factor for doing M&A beyond that $4 billion landmark? Would there be any appetite on our team's end to pursue a merger of another commercial stage CNS company? Thank you.

Eric Benevich (Chief Commercial Officer)

What I would say right now is that we have a very good growing franchise within Ingrezza, and we're going to be adding another indication to it. At the same time, we have an outstanding pipeline, which we're going to have multiple readouts going on in the rest of this year and into early next year. Is Neurocrine driven to doing a large acquisition? No, we look at everything pretty frequently. We have a, we have a great opportunity for substantial organic growth here at Neurocrine, and that's our focus at this point in time.

Operator (participant)

We will take our next question from Jeff Hung with Morgan Stanley. Your line is open.

Jeff Hung (Biotechnology Equity Research Analyst)

Thanks for taking my question. Can you talk about the potential advantages of Ingrezza as adjunctive treatment in schizophrenia over others approved for the indication? Thanks.

Eiry Roberts (Chief Medical Officer)

Thanks, Jeff. First of all, I think I don't believe there are currently any adjunctive treatments actually approved in the, in the, as base of schizophrenia. So obviously this would be an opportunity to have a first approved medication. We are very excited about the two pivotal phase III studies that we have ongoing that evaluate valbenazine as a potential adjunct in patients with schizophrenia who fail to get adequate response from currently available treatments. I think it's very important to emphasize the unmet need that exists there. The majority of patients do not get full effectiveness from currently available treatments. If they do get an efficacy response initially, then many of those patients relapse and suffer from acute psychotic episodes later on in their disease.

With respect to valbenazine, what made us encouraged about valbenazine and, and interested in going into this program was a combination of three different pieces of in, of background. The first was obviously in the context of our tardive dyskinesia program, and now with the use of Ingrezza in the marketplace in treatment of tardive dyskinesia, we have a huge database of information for patients who have received antipsychotics and valbenazine Ingrezza treatment together, and we're very confident in the safety and, and tolerability of that. In addition, we have preclinical data that was generated that shows the addition of valbenazine to antipsychotic background treatment in animal models, results in a synergistic effect.

We obviously do not have Q2 data for the combination in the clinic, but because of the challenges in psychiatry trials with failed trials and inappropriate readouts, we elected to go directly into fully powered pivotal trials. As a result, that's what we're currently, you know, implementing, and we look forward to reading out data from the first of those studies toward, at the end of next year.

Jeff Hung (Biotechnology Equity Research Analyst)

Thank you.

Operator (participant)

We'll take our next question from Myles Minter with William Blair. Your line is open.

Myles Minter (Research Analyst)

Hi. Just on the CTA for 570, the M1/ M4 dual agonist here. Are you running that phase I with any sort of anticholinergic component to mask nausea and vomiting that's been seen with that mechanism? Just, obviously referring to the xanomeline experience at Eli Lilly. Just curious as to whether there's an additive compound in that CTA. Thanks.

Eiry Roberts (Chief Medical Officer)

Yeah. I mean, I, I, I don't want to comment too much on the specifics of the design of the phase I program, but, just by background, the reasoning for the xanomeline requirement of addition of anticholinergics, at least as I understand it, is because of the peripheral side effect profile seen with xanomeline, which is thought to be predominantly due to M2/M3, the anticholinergic then knocks out that peripheral effect. We have highly selective, centrally penetrant agonists. As such, we are developing them in that fashion. I think I'll probably just leave it at that.

Speaker 25

Question.

Operator (participant)

We'll take our next question from Danielle Brill with Raymond James. Your line is open.

Danielle Brill (Biotechnology Sector Analyst)

Hi. Good morning. Thanks for the question. I'm curious, I believe your competitor is also developing their CRF1 antagonist for PCOS. Is this an indication of strategic interest for you? Curious, why or why not? Thanks so much.

Eric Benevich (Chief Commercial Officer)

Actually, not at this time. We're following, their data. At this point, that's PCOS is not an indication that we're following up on.

Operator (participant)

We will take our next question from Evan Seigerman with BMO. Your line is open.

Evan Seigerman (Managing Director and Head of Healthcare Research)

Hi, guys. Thank you so much for taking my question. I'd love to hear a little more about the expansion of Ingrezza into the long-term care market. We didn't hear much about it, and I know that's a unique, you know, unique setting, so maybe just some more on that and how that could help support growth this year or next year. Thank you.

Eric Benevich (Chief Commercial Officer)

We're excited about the opportunity, you know, to help more patients in long-term care. This is a segment that we were attracted to at the time of launch with Ingrezza back in 2017, but we didn't have the capacity to take that on, on, you know, on, on top of outpatient psychiatry, community mental health, and outpatient neurology. Last year, actually, just a little over a year ago, you know, we launched our, our, our efforts into long-term care with a, with a dedicated team. What we've seen so far is a lot of, a really good progress, and strong growth. We estimate that about 10%-15% of the total TD population resides in various residential care facilities.

It's early, early days yet in terms of that business segment. You know, our neurology and our psychiatry segments are more established than LTC. You know, all signs are positive, and we continue to be very optimistic about the opportunity there going forward.

Operator (participant)

We will take our next question from Laura Chico with Wedbush Securities. Your line is open.

Laura Chico (Managing Director, Equity Research)

Good morning. Thanks very much for taking the question. Back to Ingrezza, a commercial question. I'm wondering if you can offer any comments on the duration of treatment that people are experiencing with Ingrezza, how long they're staying on board, and just curious how that has been impacting, for example, the, the increase in guidance here. Has there been any improvements or increases in duration of treatment? I'll just put one in: Have, have you actually quantified the number of patients that were on therapy? Thank you.

Eric Benevich (Chief Commercial Officer)

I'll take, I'll take your last question first. No, we haven't. We haven't disclosed the number of patients on therapy, though I will say that it continues to grow every quarter. We've seen strong adds in terms of new patient starts, you know, even, even ever since we came out of COVID lockdown environment. In terms of persistency, you know, that's been really strong ever since the early days of the launch, and we've looked at this serially, going back to 2017, 2018, 2019, and so on. What we've seen is that patients are staying on treatment, and certainly longer than what we had expected prior to the launch, and longer than what we're seeing with some persistency with their underlying psychiatric meds.

You know, the majority of these patients are on either antipsychotics, antidepressants, or both. You know, I think we have- though we haven't given out specific numbers for, you know, a duration of average duration of treatment for a patient, you know, what we're seeing is that the persistency compares very favorably to those psychiatric meds that these patients are taking.

Laura Chico (Managing Director, Equity Research)

Thanks very much.

Operator (participant)

I'll take our next question from Sumant Kulkarni with Canaccord. Your line is open.

Sumant Kulkarni (Senior Analyst)

Morning. Thanks for taking my question. Could you remind us as to the nuance that drives the primary endpoint being glucocorticoid reduction at week 24 for diet patients, while it's serum androstenedione (A4) in pediatric patients with glucocorticoid being a secondary endpoint at week 28? What could this difference mean in terms of your ability to drive successful regulatory discussions with pediatric and adult patients?

Eric Benevich (Chief Commercial Officer)

Hey, Sumant, you came in pretty muffled. Do you mind repeating that?

Sumant Kulkarni (Senior Analyst)

Sorry about that. I hope this is better. Could you remind us as to the nuance that drives the primary endpoint being glucocorticoid reduction at week 24 for adult patients, while it's serum A4 in pediatric patients with glucocorticoid being a secondary endpoint at week 28? What could this difference mean in terms of your ability to drive successful regulatory discussions in pediatric and adult patients?

Eiry Roberts (Chief Medical Officer)

Thank you, Sumant. Both measures are important in the management of congenital adrenal hyperplasia in the pediatric and adult population. The function of choice of primary versus secondary endpoint really reflects the ability in a clinical trial setting and the kind of heterogeneity of the population in terms of the ability to demonstrate that outcome. Let me expand on that a little bit more. From an adult perspective, obviously, androgen control is extremely important, and that is the primary mechanism of action of crinecerfont is to act on the HPA axis and reduce androgen levels. As such, the first 4 weeks of that adult trial actually do look at androgen levels with crinecerfont treatment on a background of stable steroid dosing.

In adults, however, because you don't have the physiologic changes that are happening to the same extent in pediatric population, growth, development, and things of that sort, it was possible to protocolize the steroid reduction and look at steroid dose as a primary endpoint. That is important in the management of these patients, and we look forward very much to seeing the information there and understanding the impact of crinecerfont on that endpoint. In the pediatric setting, obviously, the primary endpoint is the 4-week androgen control, and that is extremely important as a measure in these patients, since obviously they are growing, developing, and changing rapidly over time. In addition, however, we do have a real-world assessment of a more real-world assessment of steroid reduction, which is measured out to 28 weeks.

As we look at the data, we'll be able to look across the populations at the consistency of the information we have. As I mentioned initially, I think both endpoints become important in the conversation around how this medicine could be used in patients out in the field.

Sumant Kulkarni (Senior Analyst)

Thanks.

Operator (participant)

We will take our next question from Mohit Bansal with Wells Fargo. Your line is open. Mohit, your line is open.

Speaker 27

Oh, sorry. This is Serena on for Mohit. Thanks for taking our question. I wanted to ask more about the expected launch in Huntington's chorea, if you can talk about any differences versus tardive dyskinesia, such as expectations for compliance rates or duration, if you expect a bolus of patients waiting for an osteo alternative or new patients to be switches from osteo. Thank you.

Eric Benevich (Chief Commercial Officer)

Yeah, let me, let me, kind of start with, the last part of your question and, and work, work forward.

Speaker 27

Okay.

Eric Benevich (Chief Commercial Officer)

You know, obviously we're excited about the opportunity and, you know, we think that with the data that we've generated, we have potentially a differentiated product. You know, we're eagerly anticipating the PDUFA date and, you know, a favorable outcome with the FDA and what those labeling look like. It's important to note that, you know, we haven't been out there talking about valbenazine in TD, or excuse me, in HD with the HD community. We'll really be introducing valbenazine as a new treatment option to the movement disorder neurologists and the general neurologists that treat the majority of these patients. Obviously, introducing valbenazine to the HD patient community and the families as well.

Initially, I think that uptake will occur in those patients that are either newly diagnosed with their chorea, or they've had chorea for some time, and they've been reluctant to be treated with existing treatment options. You know, we don't expect that there'll be a lot of switching in this market, and certainly, we haven't seen that in the TD market either. You know, ultimately, you know, the product attributes that make Ingrezza so attractive in TD, the simplicity of true once-daily dosing without complicated titration, the efficacy, the side of the, the low rate of side effects.

These, you know, these are things that we think would translate well over to the HD chorea opportunity, and we look forward to making a new treatment option available because certainly one is needed.

Operator (participant)

We will take our next question from David Amsellem with Piper Sandler. Your line is open.

David Amsellem (Managing Director and Senior Research Analyst)

Thanks. Regarding crinecerfont, this is more of a commercial question to the extent that the product works. Do you think that ultimately new starts are going to be driven in the pediatric setting, given sort of the obvious pitfalls of a high steroid burden in peds as it relates to growth? Is that the right way to think about this market and uptake of the drug, or do you see a real opportunity in adults as well? Thank you.

Eric Benevich (Chief Commercial Officer)

Yeah, I'll start off by just caveating my comments by saying: You know, first, we need to see the data. Secondly, I obviously, you know, we need to, we need to get approved by the FDA. With that, you know, I see a significant opportunity really, across all patient segments. There's been no significant medical advances for the CAH, CAH opportunity for decades. Literally, the standard of care is and, and has been and remains, glucocorticoids. You know, as Eiry Roberts was discussing, you know, there are significant issues associated with high-dose GC treatment.

You know, if you look at the different patient segments and think about, you know, who might benefit from a treatment with crinecerfont, the ability both to improve day-to-day control over the androgens, the excess androgens, as well as being able to lower the steroid burden for these patients. Certainly, younger patients would benefit as they're going through their growth years. You know, we've, we've seen that there's great interest in treating these younger patients. Adults also at various stages of their lives will benefit from a new treatment approach. You know, we think that there's going to be significant opportunity across all of those patient segments.

We're just looking forward to generating the data and, you know, being able to, to bring a new, a new, totally different approach to treatment of CAH to that population, which definitely deserves one.

Operator (participant)

We'll take our next question from Ashvin Verma with UBS. Your line is open.

Ashwani Verma (Stock Analyst)

Hi, thanks for taking my question. I wanted to ask about IRA implementation. What are you assuming with respect to how commercial channel may respond to Medicare negotiating the price down? Do, do you have conviction that your commercial pricing is insulated in a post-IRA implementation environment? Thanks.

Eric Benevich (Chief Commercial Officer)

I've said all along that, IRA is going to be a moving target. We're going to carefully monitor what is happening, especially as this September starts with the first group of companies that are going to be listed for negotiation. You know, I'd, I'd say for Neurocrine, while it impacts the entire industry, we get protected for quite a while here, because of both of the provisions for small biotech companies. The first one, the Specified Small Manufacturer Phase-In, for the new Part D program, that's going to be a discount that is phased in for us over a seven-year period of time, starting in 2025.

That's a, that's, that's a real nice advantage for us, actually, because we're going to be, if as written, we should be having lower payments to Medicare than what we currently shoulder in the current Part D. We also expect to qualify for the Small Biotech Exception, and that delays the potential for negotiation or the impact of negotiation into 2029, and it's phased in over 2029 to 2031. While we're going to be following this quite closely, and as I've said before, I'm certain there will be changes, just can't predict exactly what the changes will be with IRA. We monitor it, and we take it into consideration as we move our business forward.

Operator (participant)

We'll take our next question from Yatin Suneja with Guggenheim. Your line is open.

Yatin Suneja (Biotechnology Analyst)

Thank you. Just a quick question on the revenue per script. Could you maybe just comment on how it trended from Q1 to Q2? How should we think about Q3, Q4, and maybe where you expect to end? In terms of the guidance, you know, the chorea is not included. At what time point you might start incorporating that in your guidance? Thanks.

Matt Abernethy (CFO)

Yeah. On the guidance for HD front, yeah, it's not incorporated, we don't expect it to be too material this year. I would expect it to be incorporated as we think about 2024. From a net revenue per script perspective, as is typical, we had a few % improvement from Q1 to Q2, and as you've seen historically, you, you see it fairly consistent from here. Nothing that I'd flag other than that we do expect net revenue per script to be around $5,600 this year and access to remain very, very good. I think all is consistent there. You know, one-

Yatin Suneja (Biotechnology Analyst)

Thank you.

Matt Abernethy (CFO)

One other comment that we've not been asked about is our profit profile during the quarter. We had strong profit, but I do want to comment that we did have a nonrecurring non-cash stock-based compensation charge that impacted our GAAP earnings. From a non-GAAP perspective, we had, you know, very strong profit. I figured when you continue to look into the financials, you can see that is showing up in the stock-based compensation. We didn't increase GAAP operating expenses, but we actually did reduce our non-GAAP operating expenses. Profit profile for the company remains very strong, and we're seeing nice operating leverage in our business. I wanted to chime in there since I've not been asked a financial question and was feeling a bit left out. Thank you.

Operator (participant)

We will take our next question from Ami Fadia with Needham & Company. Your line is open.

Ethan Leong (Associate)

Hi, good morning. This is Ethan Leong for Ami. Congrats on the quarter, and thanks for taking our question. You know, last quarter, you mentioned kind of a big delta in telemedicine utilization between neurology and psychiatry. How do you kind of think about this utilization evolving over the next year or two and the impact this could have on Ingrezza growth trend? Thank you.

Eric Benevich (Chief Commercial Officer)

Yeah, the dynamics with regards to telemedicine, I think, have been relatively stable over the past year or two. There is a pretty significant difference between psychiatry and really all other specialties within, within, you know, within our healthcare system. You know, early in the pandemic, we saw this significant jump in the use of, of telemedicine across both the neurology and the psychiatry segments. As the environment improved, and restrictions were lessened, patients started to come back into the clinics and so on. We saw that neurology went back towards its more historical levels of less than 10% of visits being billed as a telemedicine visit. In psychiatry, however, or in behavioral health, that's significantly higher.

It's still hovering around half of all visits being billed as telemedicine visits. You know, we think that it's here to stay, that it's has some staying power in psychiatry, even though COVID has diminished quite a bit. The other dynamic I think that's important to note in psychiatry is really the expanded, expanded use of advanced practice providers in that segment. Those two macro factors, I, you know, I think are important to understand what's happening in psychiatry in general, in our psychiatry business in particular.

Telemedicine, you know, which creates a little bit of challenge for some providers with diagnosing TD, though I think that we've adapted nicely to it in terms of helping providers understand how to screen for, how to diagnose TD remotely when they're evaluating a patient via telemedicine. Then the important work that we're doing to educate new providers coming into psychiatry, nurse practitioners, physician associates, and so on. You know, we continue to evolve as the market evolves, but the important thing is that the majority of patients still are undiagnosed, and we're continuing to invest in driving diagnosis and treatment. The other element that I'll throw in there, like Matt, you know, just mentioned, the importance of bringing in another factor.

You know, we continue to invest in DTC. DTC is, you know, one mechanism that we have to reach patients and care partners directly to motivate them to bring up their TD symptoms and to drive diagnosis. All of these things, I think, are important as you think about future growth for the franchise. The ceiling's high, and we're continuing to see strong growth, and I think that our raised guidance reflects that.

Operator (participant)

We will take our next question from Uy Ear with Mizuho. Your line is open.

Uy Ear (Vice President and Senior Equity Analyst)

Hey, guys. Thanks for taking my question. I might have missed it, but could you tell us what the volume growth rate is for Ingrezza in the quarter? Could you also speak to the.. provide some more color on the neurology, the psychiatry and the long-term care in terms of contributions to this quarter's sales and growth rates? Thanks.

Matt Abernethy (CFO)

When, when you think about volume growth, it was incredibly strong. From a dollar perspective, you had about a 20% or 26% year-over-year growth, which was, was quite nice. As I said earlier, we did have the bleed of inventory that's also reflective in the number that we reported. We, we haven't provided the exact volume growth percentage, but, you know, it, it was quite strong during the quarter.

Operator (participant)

We have addressed all the questions in the queue. I would now like to turn the program back over to Kevin for any additional or closing remarks.

Kevin Gorman (CEO)

Thank you very much, thank you for all your questions this morning. I'm just gonna close with the fact that some of you may become a bit too used to Ingrezza just growing quarter after quarter. While we see this growth continuing, we never take it for granted. This is a tremendous amount of hard work that goes in from our entire sales marketing team, the medical team, and all the other support teams that are out there in the field. We're able to continue to bring this medicine to more and more patients suffering with TD because of those hard efforts, and yet we see no slowdown in this. That is just incredible, and we are a very fortunate company to have a product like this. They do not come along very often.

What you do see, for the rest of this year, is a number of other extremely important potential medicines in our pipeline. I'm not sure that there's any company out there that has the number of phase II and phase III trial readouts coming in the next 6 months as we do. If you extend it out into the first half of next year, it nearly doubles. There's a tremendous amount of information that we're going to be generating in just the next few months, and we very much look forward to talking to you about all these. This company is actually hitting on all cylinders right now.

We're always looking for a way to improve, and we continue to look for ways to improve our business, but I couldn't be more happy with the way the company is running at this point. With that, I'll sign off and look forward to talking to all of you in the near future.

Operator (participant)

This does conclude today's program. Thank you for your participation. You may disconnect at any time. Have a wonderful day. Goodbye.