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NBIX - Q4 2019 Neurocrine Biosciences Inc Earnings Call
EVENT DATE/TIME: FEBRUARY 04, 2020 / 9:30PM GMT
FEBRUARY 04, 2020 / 9:30PM, NBIX - Q4 2019 Neurocrine Biosciences Inc Earnings Call
CORPORATE PARTICIPANTS
Eiry Wyn Roberts Neurocrine Biosciences, Inc. - Chief Medical Officer Eric S. Benevich Neurocrine Biosciences, Inc. - Chief Commercial Officer Kevin C. Gorman Neurocrine Biosciences, Inc. - CEO & Director
Kyle W. Gano Neurocrine Biosciences, Inc. - Chief Business Development and Strategy Officer
Matthew C. Abernethy Neurocrine Biosciences, Inc. - CFO
Todd Tushla Neurocrine Biosciences, Inc. - VP of IR
CONFERENCE CALL PARTICIPANTS
Brian Peter Skorney Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst
Charles Cliff Duncan Cantor Fitzgerald & Co., Research Division - Senior Analyst
David A. Amsellem Piper Sandler & Co., Research Division - MD and Senior Research Analyst Evan David Seigerman Cr dit Suisse AG, Research Division - VP & Senior Equity Research Analyst Jay Olson Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst Joseph Robert Stringer Needham & Company, LLC, Research Division - Associate
Kyuwon Choi Goldman Sachs Group Inc., Research Division - Equity Analyst
Laura Christianson Cowen and Company, LLC, Research Division - Research Associate
Marc Harold Goodman SVB Leerink LLC, Research Division - MD of Neuroscience & Senior Research Analyst
Owen J. Drinkwater RBC Capital Markets, Research Division - Associate
Paul Andrew Matteis Stifel, Nicolaus & Company, Incorporated, Research Division - Co-Head of the Biotech Team, MD & Senior Analyst
Tazeen Ahmad BofA Merrill Lynch, Research Division - VP
Tessa Thomas Romero JP Morgan Chase & Co, Research Division - Associate
Good day, everyone, and welcome to the Neurocrine Biosciences Fourth quarter and Year-end 2019 Results Call. (Operator Instructions) Please note, today's call will be recorded. (Operator Instructions)
It is now my pleasure to turn the program over to Kevin Gorman, CEO of Neurocrine Biosciences. Please go ahead.
Kevin C. Gorman - Neurocrine Biosciences, Inc. - CEO & Director
Thank you very much, operator. And thank you, everyone, for joining us here this afternoon. Today, I have Eiry Roberts, our Chief Medical Officer; Eric Benevich, Chief Commercial Officer; Matt Abernethy, CFO; Kyle Gano, our Head of BD and Strategy; and Todd Tushla, our Head of IR, with me.
Before we start out, Todd, could you read our safe harbor statement.
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FEBRUARY 04, 2020 / 9:30PM, NBIX - Q4 2019 Neurocrine Biosciences Inc Earnings Call
Todd Tushla - Neurocrine Biosciences, Inc. - VP of IR
Yes. Good afternoon, everyone. Certain statements made in the course of this conference call that are not historical statements to 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 third quarter 2019 Form 10-Q 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 C. Gorman - Neurocrine Biosciences, Inc. - CEO & Director
Thank you, Todd. I'm going to keep my remarks brief so we can get to your questions. First and foremost, 2019 was a year where we continued to make progress in our primary focus of educating healthcare providers, caregivers and patients about tardive dyskinesia. These efforts will continue in 2020 and beyond, because the vast majority of tardive dyskinesia sufferers are still struggling, while waiting for a diagnosis and for appropriate treatment. We believe 2020 will be another year of significant growth for INGREZZA.
Now having said that, we're fortunate not to be a single-product company. In 2009, we also took important steps to build the leading neuroscience biopharmaceutical company by nearly doubling our pipeline of important medicines. This year, we will have 3 compounds in pivotal clinical trials, 5 compounds in Phase II studies and the real possibility of having 3 medicines approved in 4 indications.
Now that's a powerful foundation from which we'll build. With that said, I'd like to turn the call over to Matt and Eiry.
Matthew C. Abernethy - Neurocrine Biosciences, Inc. - CFO
Good afternoon, and thank you for joining our fourth quarter earnings conference call. I will keep my comments brief since we provided a lot of information over the past month.
Overall, INGREZZA demonstrated another strong quarter with $238 million in net product sales, putting sales over $750 million in 2019, just our second full calendar year on the market. Given our increased business development activity and noncash P&L items, we will begin reporting our financial performance on a GAAP and non-GAAP basis. Full reconciliations are included in the tables of our press release.
Our sales results translated into increasing profit with Q4 net income of $34 million and non-GAAP net income of $102 million. For the full year 2019, we finished with net income of $37 million and non-GAAP net income of $284 million. We exited the year with $970 million in cash and marketable securities.
Regarding 2020 SG&A and R&D expense guidance, we expect a range of $740 million to $770 million on a GAAP basis, and $620 million to $650 million on a non-GAAP basis. This compares to $469 million of non-GAAP R&D and SG&A expenses in 2019. The increase for 2020 reflects our increased investment in R&D, including our 3 registrational programs and meaningful investments in our Voyager and Xenon collaboration.
For SG&A, our guidance reflects continued investment in INGREZZA and marketing costs associated with the anticipated launch of opicapone. Please note that our GAAP guidance reflects approximately $100 million of share-based compensation and a $20 million expected milestone payment to BIAL connected with the expected approval of opicapone by the FDA during the second quarter.
No other future potential milestones or IP R&D associated with current collaborations or future business development activities are included in our GAAP guidance.
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FEBRUARY 04, 2020 / 9:30PM, NBIX - Q4 2019 Neurocrine Biosciences Inc Earnings Call
Regarding INGREZZA, while we've made tremendous progress developing the tardive dyskinesia market, diagnosis rates for TD are still only in the mid-teens. We'll continue our educational efforts to remain confident in our ability to help many more patients struggling with TD. Healthcare providers, patients and insurers continue to understand the value of INGREZZA, and we expect access will remain strong with similar net revenue per script in 2020 as what was realized in 2019.
As we think about Q1, the first quarter of every year is challenging for any company with a specialty tier drug due to payer-related seasonal dynamics. We are working diligently to mitigate the impact from these headwinds. Although the first quarter poses unique seasonal challenges, our long-term focus is ensuring new patients receive help with their TD and existing patients stay on INGREZZA throughout the year.
Overall, 2020 signifies an important year of increased investment into Neurocrine as we continue to grow INGREZZA, advance our existing programs and expand our pipeline.
With that, I'll now hand the call over to our Chief Medical Officer, Eiry Roberts.
Eiry Wyn Roberts - Neurocrine Biosciences, Inc. - Chief Medical Officer
Thank you, Matt, and good afternoon to everyone on the call. I will also keep my comments brief today. We remain on track with all clinical program timelines across the portfolio, including the anticipated midyear start of the registrational trial for crinecerfont in adult patients with congenital adrenal hyperplasia. Ahead of this, we will present the adult proof-of-concept data for crinecerfont at the ENDO meeting in San Francisco on March 30.
By the end of this year, we plan to have a diversified portfolio of multi-stage programs in clinical development at Neurocrine, including 3 registration study stage studies, each in a different clinical indication; and 4, early- to mid-phase neurocrine clinical program.
In the near term, the most important program in the Neurocrine clinical portfolio for patients is opicapone with a PDUFA date of April 26. Opicapone has the potential to significantly help patients impacted by motor fluctuations in Parkinson's disease, who need better adjunctive treatment options. We look forward to bringing opicapone to patients in the U.S. and to educating physicians, patients and payers on the impact, that this well tolerated, differentiated COMT inhibitor can have an improving motor functioning for Parkinson's patients.
For my remaining remarks, I'll review our 2 most recently announced collaborations, which highlight Neurocrine's entry into the field of precision medicine through our focus on rare pediatric epilepsies.
Firstly, in December, we announced an important collaboration with Xenon Pharmaceuticals, gaining exclusive rights to NBI-921352, a promising first-in-class molecule, which potently and selectively inhibit the Nav 1.6 sodium channel. We believe this molecule could have great promise in the treatment for SCN8A developmental encephalopathy or 8A for short, a rare and devastating type of pediatric epilepsy specifically related to a gain of function genetic mutation of the Nav 1.6 sodium channel. 8A very often presents in the first few months of life, and causes a chronic and complex seizure disorder with developmental delays. In addition, sudden unexpected death can occur in 10% to 20% of patients with 8A.
For the first time, with NBI-921352 and its selective mechanism of action, we plan to precisely target the ion channel implicated in 8A and offer the opportunity to provide a significantly improved benefit risk profile for these patients relative to currently available treatments.
Beyond 8A, NBI-921352 also has great potential in a range of seizure disorders, including adult focal epilepsy. We plan to file an IND application for this molecule with the FDA in the middle of 2020 in order to start a Phase II trial in a 8A patient in the second half of this year.
Secondly, in January, we disclosed that we had entered into an agreement with Idorsia, which includes the option to exclusively license ACT-709478, a potent, selective, orally-active and brain penetrant T-type calcium channel blocker, which has completed Phase I clinical study as a potential treatment for rare pediatric epilepsy.
Pending approval of the IND later this year, we plan to initiate a Phase II study in a rare pediatric epilepsy starting in the second half of this year.
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FEBRUARY 04, 2020 / 9:30PM, NBIX - Q4 2019 Neurocrine Biosciences Inc Earnings Call
In addition to the treatment of epilepsy, this mechanism has potential application across a broad range of important neurological disorders, including essential tremor and pain.
Our collaborations with Idorsia and Xenon are not competitive. In fact, they are highly complementary and reinforce our commitment to addressing the needs of patients born with rare and devastating forms of epilepsy for whom currently available treatment options are largely inadequate.
It is our expectation to have these 2 molecules in Phase II in rare pediatric epilepsies by the end of this year. Through our internal research efforts and through collaboration agreements with Xenon, Idorsia and our gene therapy programs with Voyager, we've nearly doubled Neurocrine's pipeline over the last 12 months. Each program, our growing pipeline has the potential to make a dramatic impact on the lives of patients and their families.
And I'd like to close by thanking the many cross-functional teams at Neurocrine and at our partner companies for their hard work to advance these important molecules. Kevin?
Kevin C. Gorman - Neurocrine Biosciences, Inc. - CEO & Director
Thank you, Eiry. So we're ready to take your questions at this time.
QUESTIONS AND ANSWERS
(Operator Instructions) And we'll take our first question of the day from Tazeen Ahmad with Bank of America.
Tazeen Ahmad - BofA Merrill Lynch, Research Division - VP
Maybe Eiry, a question for you. You made it a point to say that the programs that you're partnered with Idorsia and Xenon are not competitive with each other. When do you think you would be in a position to talk about what specific indications you would be pursuing for -- for one or both of these programs?
And also, how you're thinking about the general epilepsy space as those seem to be getting crowded with various mechanisms of action of drugs that are being investigated?
Eiry Wyn Roberts - Neurocrine Biosciences, Inc. - Chief Medical Officer
Thanks very much for that. So first of all, I mean, obviously, many of the drugs that are currently used in the epilepsy space, particularly in the broader, more generalized epilepsies are actually very old and in fact, in terms of their benefit risk profile, we believe there is a significant opportunity still to serve patients in that broad epilepsy environment.
If we think about the 2 mechanisms that we're focused on here. Although sodium channel blockade and calcium channel blockade have been the mainstay of treatment in epilepsy over the long-standing path. Our sodium channel approach here with the Xenon collaboration gives us the opportunity to target very specifically, one of the sodium channels through Nav 1.6. And in doing that, we believe we have the opportunity to much more selectively and on a precise way address the symptoms of epilepsy, first obviously, in the rare SCN8A pediatric epilepsy. But beyond that, more broadly, in adult focal epilepsy.
With respect to the other collaboration with Idorsia, obviously, we are still in the option phase of that agreement and once we have the opportunity to talk more about that as the IND is approved, then we'll be able to say more about the potential indication for that collaboration.
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FEBRUARY 04, 2020 / 9:30PM, NBIX - Q4 2019 Neurocrine Biosciences Inc Earnings Call
And we'll go next to Paul Matteis with Stifel.
Paul Andrew Matteis - Stifel, Nicolaus & Company, Incorporated, Research Division - Co-Head of the Biotech Team, MD & Senior Analyst
Just 2 on INGREZZA. I was wondering if you could comment a little bit on what you're seeing with respect to contracting? What do you foresee for this year? In the past, you talked about certain plans, picking one of the INGREZZA (inaudible) is preferred, but that not being rate-limiting for getting INGREZZA access. Maybe you could just speak that dynamic is continuing?
And then second, as it relates to [1.2] with seasonality being a player this quarter and then also a potential $11 million inventory headwind, is there a risk that we could actually see a sequentially down quarter? How are you thinking about that? Is that inventory going to [flow out] all at once or maybe over time?
Matthew C. Abernethy - Neurocrine Biosciences, Inc. - CFO
Yes, Paul, we'll take those questions sort of in reverse order. So as we think about the first quarter, to your point, what we reported in Q4 was $238 million in net product sales that included in it an $11 million inventory build. So the right jump-off point for Q4 would be $227 million.
Now as you think about how that translates to Q1, there's really 3 dynamics at play, but that we would want to make sure everybody thinks about informing consensus and expectations for Q1. The first 1 being the gross to net discount. Q1 is always our largest gross to net discount period because of Medicare Part D Medicare Part D donut hole and commercial copay assistance. And as you think about what I said last year, many people have estimated the impact of that could be between 4% and 5% sequentially as you think about Q4 versus Q1. So I think that's probably a directional number.
The second piece, which is actually the most material piece has to do with the delays that occur at the beginning of each year as patients go through a reauthorization process with their existing plans. And what occurs in that is it's just an extended cycle time for a patient to get their first fill and ultimately leads to a lower refill rate per patient.
Now the rate may be very similar this year as compared to last year, but the dollar magnitude will be significantly greater because we've actually doubled the number of patients on INGREZZA as -- if you compare the time now to last year. And just by way of illustration, if you -- and just to frame out the quantification is that if, on average, a patient had a reduction of 0.25 scripts within the first quarter, that would have a sequential headwind of between 4,000 and 5,000 TRx. So it could be a meaningful impact. It's not unique to us, this happens to many that have -- our specialty tier medicines. And it is clearly not a reflection of the underlying demand for INGREZZA, it's purely just a fulfillment challenge that you work through, and the teams are working hard through right now.
And then the third item is the inventory bleed that you just brought up. We have that $11 million build, it's hard to predict [how] that will materialize in the first quarter, but it's surely something that should be on your radar as far as setting expectations. And I'd just say, although I'm highlighting all these Q1 dynamics, the real emphasis here is just to make sure people understand and set appropriate expectations for the first quarter, but it does not reflect our long-term belief in the opportunity that we have within 2020 to help many more patients with INGREZZA. We're in the mid-teens of diagnosis with a fraction of that actually receiving treatment. We have a lot of opportunity ahead of us, but very complicated but we're working through this Q1 dynamic, and we wanted to make sure we provided adequate color. Anything else, Eric?
Eric S. Benevich - Neurocrine Biosciences, Inc. - Chief Commercial Officer
Yes. Paul, if I remember correctly, the first part of your question was really related to contracting activity and sort of expectations for coverage in 2020. So I'll start off by saying that patient access is critically important for us. And throughout the course of the launch, we've invested significantly
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FEBRUARY 04, 2020 / 9:30PM, NBIX - Q4 2019 Neurocrine Biosciences Inc Earnings Call
in making sure that patients and providers have relatively open access to INGREZZA. This is a specialty medication, virtually all the prescriptions require prior authorization through the plan before those claims are approved and the patient can initiate treatment.
But we've really been very pleased with the success that we've had through the early days of the launch and all the way up to current times, with over 70% of written prescriptions being filled. And from an affordability perspective, 3 quarters of patients paying less than $10 per month for fill.
So in the more recent phase of the launch, we started to gather more attention from payers as INGREZZA has become a larger brand. And certainly, we've said previously that we started to engage selectively with plans in terms of contracting activity. And I will reemphasize the word selectively because over the course of the launch, we found that regardless of whether we are on formulary or not on formulary. We've been successful in securing approval or helping to secure approval for patients in need of INGREZZA.
So where we stand today is that we're approximately a month into the quarter and a month into the year. We feel good about what the coverage landscape looks like for INGREZZA. We expect the access to remain strong in 2020. And as Matt said in his prepared remarks, we expect the net revenue per script in 2020 to be similar to what it was in 2019 as well.
Kevin C. Gorman - Neurocrine Biosciences, Inc. - CEO & Director
And about the only thing that I would like to add to what Matt and Eric have said, is that the good news is that we start 2020 with nearly twice as many patients as we started 2019, and that's great. It shows the acceptance of INGREZZA in the patient population and also by our customers, the Allied Health professionals. But the downside of that is, as we've talked about, it leads to the challenge in Q1. And you have seen in the past and as we talked about before, that it's an ebb and flow. So Q1 is the ebb and Q2 generally is the flow as we come out of it and we have a strong year. So that is -- we just wanted to be able to give as much color to this quarter and to the year as we could on this call.
Next, we'll go to Brian Skorney with Baird.
Brian Peter Skorney - Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst
I guess maybe if I can ask about ACT-709478 program. Can you just kind of walk us through your thoughts on the development program, how you envision this drug being used? And maybe your thoughts on clinical trial design and mechanism? How you can overcome some of the difficulties, others have had in developing recent drugs and epileptic indications, specifically thinking about kind of the recent neurosteroids that are primarily GABAergic, but also do block T-type calcium channels? And would you envision this Phase II study being placebo-controlled or a comparator study?