Kevin Gorman - President and CEO
Jane Sorensen - IR
Tim Coughlin - VP and CFO
Chris O’Brien - SVP and CMO
Sara Slifka - Morgan Stanley
Irene Lau - Leerink Swann
Yale Jen - Roth Capital
Neurocrine Biosciences, Inc. (NBIX) Q1 2013 Earnings Conference Call May 2, 2013 5:00 PM ET
Good day, everyone and welcome to Neurocrine Biosciences Report First Quarter 2013 Financial Results. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the Q&A. (Operator Instructions). Please note, this call maybe recorded and I will be standing by should you need any assistance.
It’s now my pleasure to turn the conference over to Kevin Gorman. Please go ahead. Please stand by while we await our speaker.
Thank you very much, and we apologize for the slight glitch when the call started. Thank you all for joining us today. I am here with Tim Coughlin, our CFO and Chris O’Brien, our Chief Medical Officer. Today we are going to walk you through the financials for the first quarter and give you an update on our R&D programs. But First Jane, could you please read our Safe Harbor statement.
Yes. Good afternoon. I want to remind you of Neurocrine’s Safe Harbor cautions. Certain statements made in the course of this conference call that state the Company’s or management’s intentions, hopes, beliefs, expectations or predictions of the future are 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 Annual Report on Form 10-K and quarterly reports on Form 10-Q. Copies of these filings may be obtained by visiting the Investor Relations page on the Company’s website at neurocrine.com. Any forward-looking statements are made only as of today’s date and we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances. Kevin?
Thank you, Jane. Tim, we will start with you.
Sure. Thanks Kevin and good afternoon to everyone. Today we released our financial results for the first quarter 2013. Our net loss for the quarter was $0.18 per share, compared to the loss during the first quarter of 2012 of $0.01 per share. The main drivers of this difference in operating results were a decrease in collaboration revenue under both the AbbVie and Boehringer Ingelheim license agreements. The collaboration portion of both these agreements ended as planned during 2012. We remain on target for an annualized cash flow of $50 million to $55 million consistent with the guidance provided at the beginning of the year.
We ended the first quarter of 2013 with approximately 177 million in cash and investments and receivables. Revenue for the quarter was approximately $700,000. We expect revenue to remain at this level for the balance of the year. Recall we are not expecting any milestones in 2013 under existing collaboration agreements. This milestone is anticipated to resume in 2014.
Research and development expense increased in first quarter over the first quarter of 2013 over the first quarter of 2012 and for the last quarter of 2012 to this quarter. The main driver of this increase is the Phase IIb activity in our VMAT2 program. We expect R&D expense to continue to increase into the second quarter of 2013. General and administrative expenses decreased year over year and was flat from the fourth quarter of last year to the first quarter of this year.
The decrease in G&A expense year over year was primarily due to continuing cost containment efforts and we expect G&A expense to be at this approximate $3.4 million level for the remaining three quarters of the year.
Our financial guidance for the year remains unchanged. We expect approximately $3 million in revenue from upfront license fee amortization and expenses for 2013 should approximate $55 million to $60 million. Our net loss for 2013 is expected to be $50 million to $55 million. We expect to end 2013 with in excess $130 million in cash investments and receivables. Last thing I want to mention is our 10-Q will be on file today with the SEC for anybody looking for additional details.
Now with that I will turn it back to Kevin for the balance of the call.
Thanks Tim. Prior to turning it over to Chris, I would like to give an overview of our two main programs. The first AbbVie has made significant progress with Elagolix. Earlier this quarter AbbVie achieved proof of concept in the large Phase IIa trial studying uterine fibroids and based on this result they moved the compound rapidly into a six month Phase IIb study of approximately 280 women with uterine fibroids.
They stated that this study will complete in the second half of 2014 and if positive they will move into Phase III by the end of 2014. Now they are also track with the Phase III endometriosis study. My understanding is they are very pleased with the conduct of that study today and continue to anticipate top line data in Q1 in next year. We are fortunate to have AbbVie as a partner they are improving their expertise and their dedication to this program.
Now changing over to our VMAT2 program, that is also progressing well. We are very pleased with the conduct of each of the trials, and Chris will go into more detail on that in a moment. Enrollment of these studies started out slower than we had anticipated as we developed learnings of how to reach these patients. We are enrolling well in both trials, and at this rate that we have, we will have top line data for Kinect in Q3 with Kinect 2 reading out shortly thereafter.
We will request an end of phase II meeting later this year, and depending on FDA’s schedule, continue to anticipate that we’ll hold that meeting prior to year end. Based on the date of the two studies, the two Phase IIb studies, the program remains on track to start Phase III in the first half of next year.
Now with that overview, I’m going to turn it over to Chris.
Thanks very much Kevin. Let me give you some detail on the Kinect and Kinect 2 studies. Recall both studies are in patients who have moderate or severe tardive dyskinesia. The Kinect study is for TD patients whose underlying diagnosis schizophrenia or schizoaffective disorder. The Kinect 2 study is for patients with bipolar disorder, mood disorder, or Reglan-induced tardive dyskinesia.
The Kinect study is proceeding well. We have screened approximately 180 subjects at 40 sites as of this week. And out of these, 30 sites have 90 subjects who have either randomized or are waiting randomization shortly.
Once the last subject of this group is randomized, our top line data from the placebo controlled portion of the trial will be available approximately 10 weeks later. At the current rate of subject qualification for the trial, we anticipate data read out in Q3 as Kevin motioned.
We are very pleased with the quality control mechanisms that have been in place in these Phase IIb studies. They appear to be performing exactly as anticipated. We are enrolling only subjects with moderate or severe tardive dyskinesia, and today looking at the blinded baseline data that we have, the baseline aims mean score is approximately 15. So, that's moderate to severe TD, and the standard deviation that we see around that is under four points.
So, this is in keeping with our initial projections and the assumptions that we used in our sample size estimation and power calculations. Our stringent inclusion and exclusion criteria that we imposed because this is a critical Phase II study, meaning that many potential subjects with tardive dyskinesia have been excluded from enrollment into these trials.
So, for example, we have patients with comorbid conditions that for Phase II, we don’t allow into the trial people with hepatitis history, who have abnormal liver enzymes, people who have a positive urine test for drugs of abuse obviously in Phase II and attempt to have a very tightly controlled study population where we get our initial read on dose response and safety profile, we’re being very cautious about who gets allowed into the study.
So we had to exclude patient's with tardive dyskinesia from Phase II. It’s our goal with our development program and some of the other work that we’re doing in conjunction with discussions with FDA that we’ll be able to address some of these exclusionary challenges, so that by the time we get to phase III, this give us a little more flexibility and allows us to enroll a broader scope of patients.
Our safety profile continues to be very good. We’ve had no evidence of treatment-emergent laboratory abnormalities, ECG abnormalities, or serious adverse events. It is this electronic data capture that allows me to look at the blinded map and adverse event data on an ongoing basis, and of course it is that electronic data capture which will allow us to go from last subject, last visit to top line results in just a few weeks rather than the longer time periods that previously we were stuck with.
The other interesting thing about that Kinect study is that the early termination rate is very low, that is patients who discontinue participation in the study. Normally when you dealing with Schizophrenia patients with tardive dyskinesia complex medical problems, you might assume that these subjects would have a high dropout rate particularly over a six or 12 week interval.
But so far, we’ve had seven subjects who have early terminated during the placebo-controlled portion of the trial, and two of these were due to adverse events. Both of these were patients who had Schizophrenia symptoms, which led to their discontinuation.
These were judged by the investigators, not could be treatment related and obviously we're still blinded; we don’t know they were on placebo or whether they were on active but obviously we’re very happy with this very low discontinuation rate, very gratifying as to the conduct of the study and the appropriateness of the subjects that have been enrolled as well as the conduct that the investigators bring to the table.
So that’s the Kinect study marching along well, top line results in Q3. The Kinect 2 study is also proceeding well. Obviously it’s little earlier since that was the second study we started. We've screened approximately 45 subjects as of this week and that’s actually only 13 sites of our targeted 30 sites. We’re still working with some of the sites to complete their local IRB with new process or certification of the range, radar, et cetera.
Of the 45 subjects that have been through screening, 26 subjects have been randomized or are awaiting randomization. And again in this trial, like the Kinect study, once the last subject is randomized, about 10 weeks later we will have top line results, until obviously, we will keep you informed when the last subject in the Kinect study is randomized and when the last subject in the Kinect II study is randomized and these can count out 10 weeks to your topline results.
It's a little too early to be on and what we think the last randomization will be for this study, but as the study goes along we will get a better handle on that, anticipate top line data shortly after the Kinect study reads out.
Like the Kinect study, the Kinect 2 study, safety profile to date has been very good, No evidence of treatment-emergent laboratory abnormalities, ECG abnormalities or serious adverse events and there have been no early terminations or dropouts to date in the Kinect II study.
It has been fascinating being part of this initiative. We are the first company to do the very careful and large scale tardive dyskinesia studies for drug development and what we are finding is that there are many-many patients with tardive dyskinesia out there. Enrolment of this patient as subject in our phase II clinical trial is complicated and we are in the learning process. As Kevin mentioned earlier on we were in the learning process, trying to figure out how to find these subjects and the investigators. Many of these subjects are socially isolated for example and we are learning who are the best investigators with whom to collaborate. Some investigators do a better job in phase II trial setting for example. Those investigators that actually have their own database of their own patients are much more productive at enrolment than investigators who are schizophrenia clinical trial experts who reach out to community to find patients. So this will help us as we shape our plans for the larger phase III studies.
We've encountered a high prevalence of comorbid conditions in these patients and as I mentioned; the hepatitis, the drugs abuse, prohibitive comment (ph), we are putting in place all the steps that we need to try to avoid these challenges as rate limiting and future studies and obviously we are coordinating our discussions with the FDA to that end.
In addition to the work getting us to Phase III next year, we are involved deeply across several disciplined functional groups here at Neurocrine and quantitative market research, working with marketing and commercial activities in the clinical group, finance group, et cetera and we plan on sharing this quantitative market research with our investor community as the data emerges.
So I think I will pause there and turn it back to Kevin and I look forward to some questions in discussion.
So I hope that that gives a lot of color to you now for the first on these studies and how well they are going with us. So at this point I would like to open it up for your questions please.
(Operator Instructions) Our first question comes from Sara Slifka with Morgan Stanley. Please go ahead.
Sara Slifka - Morgan Stanley
I actually had two. First on 854, can you remind us where you are with any pre-clinical CARC work and QT work and then what was required in terms with tetrabenazine in these two areas? And then secondly, just on uterine fibroids, I know you guys are using or AbbVie is using alkaline hematin to measure blood loss. Lupron is showing I think about 80 plus percent reduction of blood loss on PBAC. So, it looks like those two measurements don’t necessarily always correlate. So with regards to alkaline hematin, what do you see as a good benefit and what do you think that AbbVie needed or wanted to see in order to move in to the Phase IIb?
So, let me start with the tetrabenazine 854 question first. So, the pre-clinical program is fairly extensive in what's been accomplished to-date. We were in the middle of our long-term talk studies, and obviously we have not started the carcinogenicity study yet, but we will be continuing our discussions with the FDA as far as what they need and want. We have had a very productive set of interactions with them in that regard so far, and our CARP program is not going to be rate limiting or critical path in us getting to NDA filing.
So that's all good. With respect to tQT through QT studies, we have built in a lot of QTC assessment in our program in our Phase I work, 12-lead digital Holter analysis by outside experts et cetera, but we have not conducted the thorough QT study yet, and the reason for this is very straightforward.
You need to know what you're clinical dose is, so then you can calculate the doses to take into the tQT trail, both the expected dose and a super therapeutic dose, and so once the 1201 Kinect study reads out, we'll be in a position to have those discussions.
We have already begun the process of setting up the tQT study working with outside vendors and cardiologists, and so we will be in a good position to get that study started. My goal is to have data from the tQT study around the time at the start of the Phase III study. So, that should be well in hand.
And you asked about what Xenazine was required to do for its approval here in the US. It did; QT study as you know, showed a small prolongation of QTC in that trial and that led to the labeling black box warning that includes the risks of QTC prolongation, the advice to be very cautious about using Xenazine in patients who are on anti-psychotics, particularly those that have an associated risk of QTC prolongation, and let's see what (indiscernible. You asked about CARC in tetrabenazine.
So yes, they did carcinogenicity studies and that information if you're interested is obviously available in the Xenazine review documents that the FDA has on file at their website.
Now, with respect to uterine fibroids, obviously we can't speak to a lot of the details on the AbbVie program as we have said all along, but the literature is quite clear that the alkaline hematin method and the pictorial blood assessment methods we're looking at blood loss; uterine blood loss, they actually correlate very well.
They are different numbers, in terms of percent blood reduction and amount of the blood, how many milliliters, but they actually correlate very well, and it's my understanding that actually AbbVie in their Phase IIb study has both alkaline hematin and pictorial methods built into the trial, but I would have to go back and look at clinicaltrial.gov to confirm that. They correlate well and as far as what amount of reduction the FDA wants, I don’t think AbbVie has shared that with anyone, and I am certainly not in a position to say what is clinically meaningful.
Thank you. We will go next to Marko Kozul with Leerink Swann. Please go ahead.
Irene Lau - Leerink Swann
Hi. Thanks for taking my questions. This is Irene in for Marko. On Elagolix in endometriosis, can you talk about the enrollment pace for the Phase III trial and what are you seeing seen from the 160 centers?
So, what AbbVie has shared with us is they’re very happy with the conduct of the phase III endometriosis trial that they are on track for reporting top line results in Q1 of 2014, as Kevin mentioned, and you know I think, I am glad that you actually brought this up. This is a good example of -- in the early days, we were running endometriosis trials, no one knew how to reach these patients for enrolment into phase II.
We did a lot of work on figuring how to do patient recruitment, and we went from very slow recruitment in the early phase II studies to very rapid recruitment in the Daisy PETAL study because we had figured that out, how to use Facebook, what not to do on TV, what to do with radio, what kind of wording and imagery to use etcetera. And that’s what’s happening now with our tardive dyskinesia, no one has ever figured this out before. We are making the learnings as we go, and I think what you will see is our early phase II program progresses into phase III, you will see a refinement in the ability to reach out to these patients. But AbbVie has been very happy with the results, as I say and they say they’re on track.
Irene Lau - Leerink Swann
Just one next question for uterine fibroids, can you talk about the Phase II B trial design in terms of the similarities and differences to the Phase II A, like patient inclusion/exclusion criteria, rationale behind the choice of background in each amount of doses?
I am not in the position to do that. Unfortunately, as we have had to sail along, this is AbbVie’s program, it’s not our program. We don’t have the details to answer those questions directly.
And actually one of the reasons why we chose AbbVie as a partner was that their extensive experience and expertise in uterine fibroids. We never treated a UF patient in our entire 1000 patients that we treated. So, that is probably a much better question to be directed into AbbVie.
(Operator Instructions) We will go next to Yale Jen with Roth Capital. Please go ahead.
Yale Jen - Roth Capital
First is that for the endometriosis, the second phase III study, is that still scheduled to start in mid-13? Do you have any colors on that?
I think that the last public statements that AbbVie made on that would be -- they did not say actually mid, they said that it would be in the second half of 2013, I think is what they last publicly stated.
Yale Jen - Roth Capital
Okay second question is that it looks that both for Kinect and Kinect II that is roughly 50% of the patients screened that will be automated randomized. Is that what you anticipated before and is it something that you see that continuing to particularly in the Kinect 2?
So it is good observation Neil thanks we did plan about 50% screen fail rate. What we didn’t fully understand is what is the nature of screen failure and I think that it has proven to be an interesting thing. It depends on many things it depends on who the investigators are, where they draw their patients from as potential subjects and the nature of the screen failure.
So sites that have their own patients, that are in the clinic that the investigator works, they tend to fail for different reasons than sites that are standalone schizophrenia trial centers that are trying to get patients from the community physicians and so we will obviously use this information going forward as we are design our Phase III trials and our recruitment methods but I would anticipate we will continue with about 50% of screen fail rate in the Kinect 2 study as we have seen in the Kinect study.
Yale Jen - Roth Capital
And second to last question is that given that the data release seems slightly push out to the third quarter for the Kinect, do you feel comfortable that the Kinect 2 data will come out in time for potential at the end of Phase II meetings at the fourth quarter of this year?
Yes I do and from an early indication, and as I said it is a little early in the Kinect 2 to be very precise but that study seems to be going well. We actually took some learnings from the Kinect study as far as which investigators we were working with and are using those who have more direct access to patients.
So that is going well and I think what we have to-date, the numbers that we have in Kinect 2 is that at this point just 13 sites have actually randomized subjects and we are planning on having all 30 sites up and running and randomizing. So I think we will see a nice upslope there that will keep us in good standing.
Yale Jen - Roth Capital
And last question here is that you started some market analysis for the TD market. Do you have anything you can share at this moment in terms of what your current sort of view in terms of market size and other details?
Yale, this is Tim. We’ve done some qualitative work and what we’re working right now is quantitative work. And what the qualitative work shows is we’ve got basically a population of 0.5 million people here to treat. The quantitative work so far is supporting that but it’s too early and what we want to do is get a complete picture to provide a breakdown for everyone along underlying diseases, what the patient population looks like, the payer population etcetera. So when data is all collected which will be later this year, we will share a full picture complete picture with history.
Thank you. It appears we have no further questions at this time. I’ll turn it back to Kevin Gorman.
Thank you very much and thank you everyone for participation today. We’re very enthusiastic about the programs that we have going and the way these programs are moving forward. Speaking specifically to VMAT2, we’re highly confident that we have the right mechanism in order to treat multiple mood disorders. We’re also very confident that we have the right compound in 854.
What we needed to have in these studies is the appropriate patient population and also have an appropriate administration of the AIMS scoring system and we feel very good right now with both of these studies that we’re achieving those of also. So looking forward to sharing that data with you little later this year.
So with that, we’ll be seeing at several meetings coming up and also happy to field any calls or emails that you might want to send in. Thank you.
This concludes today’s program. We do appreciate your participation. You may disconnect at any time and have a great day.
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