Corrected Transcript 31-Jul-2018 Neurocrine Biosciences, Inc. (NBIX) Q2 2018 Earnings Call 1-877-FACTSET w.callstreet.com Total Pages: 20 Copyright 2001-2018 FactSet CallStreet, LLC Neurocrine Biosciences, Inc. ( NBIX) Q

Neurocrine Biosciences, Inc. (NBIX)

Q2 2018 Earnings Call

MANAGEMENT DISCUSSION SECTION

Operator: Good day, everyone, and welcome to Neurocrine Biosciences

Reports Second Quarter 2018 Results. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during a Q&A session. [Operator Instructions] Please note today s call is being

recorded and I will be standing by should you need any assistance.

It is now my pleasure to turn the conference over to Kevin Gorman, CEO. Please go ahead,

Kevin Charles Gorman

Chief Executive Officer &

Director, Neurocrine Biosciences, Inc.

Thank you very much and welcome, everyone, to our quarterly conference call. Before we start, we re going to

be making forward-looking statements. So, Jane, if you could read our Safe Harbor statement, please.

Executive Assistant, Neurocrine Biosciences, Inc.

Okay. Certain statements made in the course of this conference call that are not historical statements may be forward-looking statements which are subject to risks and

uncertainties. Information concerning factors that could cause actual results to differ materially from those contained in or implied by the forward-looking statements is contained in the company s SEC filings, including, but not limited to,

the company s Quarterly Report on Form 10-Q filed today and in today s press release. Copies may be obtained by visiting the Investor Relations page on the company s website. Any forward-looking

statements are made only as of today s date and we disclaim any obligation to update these forward-looking statements. Kevin?

Kevin Charles Gorman

Chief Executive Officer & Director, Neurocrine Biosciences, Inc.

Thank you, Jane. So, I m joined here today by Eiry Roberts, our Chief Medical Officer; Matt Abernethy, our Chief Financial Officer; and Eric Benevich, our Chief

I d like to start the call off by congratulating our partner, AbbVie, and, in particular, the entire clinical and regulatory team in

Chicago. They ve done an outstanding job with elagolix since we formed this partnership several years ago. I think that I echo what Rick Gonzalez said on their call earlier in the week that the label for ORILISSA is an outstanding label. And it

is indicative of, it s reflective of the real high quality Phase III program that was conducted by AbbVie.

We have flexibility of dosing in this label. There

is no monitoring requirements in this label. While there is a recommended duration of dosage treatment, the patient can stay on the drug and definitely that is a decision up to the patient and their physician. There is no restriction on duration of

dosing. There is no boxed warnings. And so I really think that this label is outstanding and, as I said, the quality of the development program, the regulatory program that went into this shines through here.

I also want to say that going forward we have complete confidence in the AbbVie commercial team. We ve been interacting with them for, boy, I d say, nearly

the last two years and we ve seen a lot of the work that has started to come out with ORILISSA and the work that Rick Gonzalez talked about that you re going to see over the next

several months. And so we have nothing but confidence in AbbVie and how they will handle this launch and the trajectory

Now, I would like to switch gears and let s talk about Neurocrine. And so I want to take a step back. This really is a special and unique time

for any biotech company. Calls like this, the quarterly earnings calls that go over just the past three months, but this is, as I said, is a very special moment in time and I don t want it to get lost as we go into the details over the next

We are a company that is in the very early stages of a continuing extremely successful launch and with a product that treats a disease that was previously

untreatable. And if that isn t enough, we have a second drug approved that will change the lives of millions of women. Both of these drugs were discovered here at Neurocrine. I think I speak for all of us, both current employees and former

employees that we are both proud and humbled to be in this position.

So, with that, let s get into the details. And I d like to start by turning the call

over to Matt, and he can talk about what a great quarter this has been.

Matthew C. Abernethy

Chief Financial Officer, Neurocrine Biosciences, Inc.

Yeah. Thanks, Kevin. Good afternoon and thank you for joining our second quarter 2018 earnings conference call. Neurocrine has had a tremendous start to 2018 with

INGREZZA s continued success, ORILISSA receiving FDA approval, positive Phase III data for uterine fibroids and a green light from the FDA to proceed towards an NDA submission for opicapone.

During the second quarter of 2018, INGREZZA saw script volume increase to approximately 16,700 scripts, resulting in $96.9 million in net product sales. This

compares to 12,500 scripts and $71.1 million in net product sales for the first quarter of 2018. Through the first six months ended June 30, 2018, INGREZZA net product sales were $168 million compared to $6.3 million for the same

As a reminder, INGREZZA was made available for commercial distribution on May 1, 2017. The TRx upward trajectory during the second quarter

reflect steady new patient flow and uplift coming off of payer-related seasonality in Q1 and continued positive persistence trends. We expect persistent trends to wane further over time as we have more patients on drug longer.

Regarding net revenue per script for Q2, we experienced a slight increase from approximately $5,700 per script in Q1 2018 to approximately $5,800 per script in Q2 of

2018. The increase is primarily a reflection of lower impact from the Medicare Part D donut hole as compared to Q1. This was partially offset by the continued decrease in scripts being filled as 240 milligram capsules versus the 180 milligram

capsule. Scripts being filled with 240 milligram capsules was in the mid-single-digits of our total scripts during the quarter and expect this to continue to decrease throughout 2018.

Net loss for the quarter was $5.9 million or $0.07 loss per share compared to a net loss of $60 million or $0.68 loss per share for the same period in 2017.

For the six months ended June 30, 2018, the net loss was $47.7 million or $0.53 loss per share compared to a net loss of $138.3 million or $1.58 loss per share for the same period in 2017. Recall that INGREZZA was launched in the

second quarter of 2017, so when comparing 2017 to 2018 there is only $6 million of corresponding Rx revenue during the first half of 2017.

Research and development expenses were $37 million during the second quarter of 2018 compared to

$21.9 million during the second quarter of 2017. The increase in R&D expenses during the period is a reflection of the continued progress being made across our pipeline, including Tourette s, CAH and also preparation for our

anticipated 2019 opicapone NDA filing. In addition, we continue to invest preclinically with a goal of at least one IND in 2018.

For the six months ended

June 30, 2018, R&D expenses were $85.9 million as compared to $73.8 million for the same period last year. The increase from the prior year was primarily a result of an increase in the previously mentioned clinical program

activity and $8 million nonrecurring stock compensation charge in Q1 of 2018, as well as a $10 million milestone payment to BIAL in Q1 of 2018. This year-over-year increase in R&D during the first half of 2018 was partially offset by

the timing of a $30 million exclusive licensing payment made to BIAL for opicapone in the first quarter of 2017.

Sales, general and administrative expenses

increased to $60.9 million for the second quarter of 2018 from $41.7 million for the second quarter of 2017. For the six months ended June 30, 2018, SG&A expenses were $119.6 million compared to $69.7 million for the

same period last year. The increase in SG&A expenses across both periods is primarily due to commercialization activities for INGREZZA. Our cash, investments and receivable positions as of June 30, 2018, was over $800 million,

positioning us well to execute our near-term company strategy.

Now, a few comments as we look ahead towards the second half of 2018. With the approval of ORILISSA,

we will recognize revenue during the third quarter for the $40 million event-based milestone due to Neurocrine under our collaboration agreement with AbbVie. In addition, we will also begin earning a tiered royalty from AbbVie based upon their

net sales of ORILISSA following their launch in August.

As it pertains to INGREZZA, we remain encouraged by our progress in the marketplace and also how we are

executing our sales force expansion plan which we expect to have completed entering the fourth quarter of 2018. Specific to INGREZZA third quarter net product sales, we expect there to be continued new patient demand and an increase in overall

script volume. As with all launches, certain factors cause fluctuations in growth quarter-to-quarter.

For us, the items we re managing through heading into Q3 include the possibility of distraction from our sales force expansion, seasonal dynamics and the continued

decline in less scripts being filled as two 40s. The long-term potential within INGREZZA is robust. But as always, I want to make you aware of the key items we re focused on specific to Q3. Regarding operating expenses for 2018, we still expect

our operating expenses to fall within our previous guidance range of $395 million to $420 million.

With that, I will now hand the call over to our Chief

Commercial Officer, Eric Benevich.

Chief Commercial Officer, Neurocrine

Thanks, Matt, and hello to everyone joining us on today s call. The second quarter of 2018 was a great quarter for our INGREZZA TD

launch and I couldn t be more proud of the performance of our team and their effort to help the many patients suffering from TD. As of Q2, we have now been on the market for approximately a year and the launch continues to exceed expectations.

As Matt said, net sales in Q2 were nearly $97 million, representing a 36% increase over the previous quarter.

In over our first four full quarters of our launch, we have generated $278 million in net sales. A key metric of

assessing performance is the impact to patients, which is reflected in our total prescriptions which increased 34% over the prior quarter to 16,700. New patient starts remained steady and patient persistency continues to be in line with our

expectations as the launch matures.

From a prescriber perspective, our TRx growth is coming from both new prescribers and prescribers expanding use within their

practices, as they get experience with INGREZZA. We see ample opportunity over the coming years to expand both the breadth and depth of our prescriber base, which we believe will be realized through continued disease state awareness, education and

real-life clinical experience with INGREZZA.

The INGREZZA brand continues to see favorable coverage across all payer segments, with the vast majority of

prescriptions requiring a prior authorization confirming a diagnosis of TD. Through the first year of the launch, approximately 80% of written prescriptions have led to a dispense medication and INGREZZA remains affordable for patients with over

three-quarters of them paying less than $10 out-of-pocket per month.

the market leader in TD and we intend to build on that momentum. Our previously announced sales force expansion is right on track. We have received literally thousands of applications for less than 100 new sales positions. We re currently

interviewing many highly qualified applicants across the country with extensive experience in neurology and psychiatry, consistent with our existing sales team.

Matt mentioned, we re taking measures to minimize distraction from this expansion on our current sales team and existing customers. And we expect to deploy our newly expanded team in Q4. Combining the new team members with our highly capable

existing sales force gives us great confidence that we ll continue to make significant progress in developing the TD market over the years ahead.

forward into the balance of the year, we are focused on executing our plan of continuing our TD educational efforts. We are helping healthcare providers recognize the range of presentations and severities of TD, helping them appreciate the

multifaceted burden that TD can place on patients and their loved ones, and urging them to identify and treat appropriate patients with INGREZZA, the first FDA approved medication for TD and the only treatment option that offers robust efficacy, no-box warning, favorable tolerability, and simple once-daily dosing without complex titration.

So, in summary, Q2 2018 was a

great quarter for the INGREZZA brand and for our company. We attribute these strong results to an attractive drug profile, a great team and also focused execution of our market-building strategy. Approximately a year into our launch, we continued to

deliver consistent and steady growth. And most gratifying to me and the rest of our team is that we have helped thousands of patients suffering from TD. We are truly living up to our shared aspiration of delivering on hope.

So, with that, I ll now turn the call over to Eiry Roberts, our Chief Medical Officer, to discuss progress with our clinical programs. Eiry?

Chief Medical Officer, Neurocrine

Thank you, Eric, and good afternoon to everyone on the call. I m pleased to be able to provide an update on progress this quarter

across our clinical programs. For INGREZZA, at the American Psychiatric Association Annual Meeting in May, we shared new data from the RE-KINECT study.