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Neurocrine Biosciences, Inc. (NASDAQ:NBIX)

Q2 2009 Earnings Call Transcript

July 30, 2009 8:30 am ET

Executives

Kevin Gorman - President and CEO

Jane Sorensen - IR

Tim Coughlin - VP and CFO

Chris O'Brien - Chief Medical Officer

Analysts

Brian Abrahams - Oppenheimer & Company

Phil Nadeau - Cowen & Company

Tommy Nuane [ph] - Piper Jaffray

Larry Smith - DLS Research

Operator

Good morning and welcome to Neurocrine Biosciences Second Quarter Earnings Call. At this time, all participants are in listen-only mode. (Operator instructions). Please note this call is being recorded.

I would now like to turn the call over to President and CEO of Neurocrine Biosciences, Mr. Kevin Gorman.

Kevin Gorman

Thank you very much, and welcome everyone this morning. I'm joined this morning by Chris O'Brien, our Chief Medical Officer; and Tim Coughlin, our CFO; and Jane Sorensen, Investor Relations.

This morning what we are going to do is Tim is going to run you through the financials for the second quarter and year-to-date. And then, Chris will take you through an update on all of our clinical programs.

Hopefully, you’ve had a chance to see our press release yesterday morning, where we gave the six months update to the 702 Lilac Petal Study. So Chris will be spending some time on that and then going on over the entire elagolix program.

Before we get started, I would like to ask Jane to read our Safe Harbor statement please.

Jane Sorensen

Good morning. 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 www.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 Gorman

Thank you, Jane. Okay, Tim, if you can give us an update.

Tim Coughlin

Sure. Thanks Kevin and good morning to all from here in San Diego. Following up on our clinical news from yesterday morning, we released good financial results yesterday afternoon. The short story is that we aren’t planning from a financial standpoint in spite of the fact that we incurred a $3 million charge during the second quarter for our severance program.

The company is implementing cost containment efforts throughout the organization and through these efforts; we were able to offset a good portion of this $3 million severance charge that remain on plan. I should also mention that the overwhelming majority of the cost for the recent severance has actually been paid to the impact the employees prior to the quarter end and that’s reflected in our cash and investment balance at June 30th.

Our loss for the quarter was $0.39 per share, based on 39 million shares outstanding. For the same period last year, we had a loss of $0.55 per share. Our loss for the quarter was essentially what we had budgeted in spite of the severance charge. Our year-to-date loss is $0.90 per share compared to $1.10 per share last year, slightly higher than budget due to the first quarter expense related to the (inaudible) the front building and the $1.4 million charge related to the downgrade on the auction rate securities we hold with Citi.

Our research and development and general and administrative expenses were in line with our expectations and down from the previous year. Overall, we will see these expense decreasing in the last two quarters of the year due to lower personnel cost and lower professional service cost. However, our external development expenses will rise slightly during the second half of 2009, due to the commencement of our carcinogenicity studies for elagolix and the start of the VMAT2 Phase I trial.

As I explained during the first quarter call, there are a couple of accounting nuances that one has to consider when comparing 2009 and 2008 numbers. They all relate to how we will require to account for the rent expense and the building in 2009 versus 2008. The first is related to rent expense in 2008, rent expense is treated as interest expense in accordance with generally accepted accounting principles. In 2009, the same rent expense is now characterized as a component of operating expenses.

Secondly, during 2009, we’ve began to recognize our deferred gain on the sale of the building that occurred in December of 2007. This accounts for approximately $700,000 of non-cash other income each quarter. Finally, we recorded rent on a straight line basis over the terminal lease. This adds approximately $300,000 of non-cash expense each quarter to the income statement.

From a cash and investment perspective, we are managing our cash flow and expenses closely. We ended the quarter with $74 million in cash and investments, slightly ahead of plan. This was due to the recovery in value of our two auction rate securities with Citibank. Recall that during the first quarter, these two investments were downgraded by Moody’s and we took a $1.4 million income statement charge in the first quarter.

During the second quarter, global credit markets improved and credit spreads narrowed. And these investments regained most of their value loss due to the Moody’s downgrade. This recovery was recorded as other comprehensive income in the balance sheet. As (inaudible), we have all of our auction rate securities evaluated by an independent evaluation firm for financial reporting purposes.

Looking forward to the second half of 2009, we reaffirm our guidance of managing the company to a burn from operations of approximately $50 million to $55 million for 2009. We will file our 10-Q today with the SEC.

And with that, I will turn it back over to Kevin, for the balance of the call.

Kevin Gorman

Thank you very much, Tim. As you can see, we continue to be in a very good financial condition. Right now, I would like to turn it over to Chris O'Brien, to take us through the clinical programs.

Chris O'Brien

Thanks Kevin, and good morning to you on the call. Happy to talk about the progress we are making in our various clinical programs. So I will touch on elagolix, Urocortin 2, VMAT2, and Indiplon.

Let me start out with the news for elagolix, as you are aware from our press release yesterday, we have completed the six-month portion of the Lilac Petal Study. We were happy to lock the database for this trial just two weeks ago and give you the preliminary look at the numbers in the press release.

If you recall, the Lilac Petal Study was our fourth of five Phase II trials. This is the one we reported the primary endpoint which was comparison of elagolix to placebo at the Week 12 time point and we talked about that in March of this year. Obviously, the trial completed for the reminder of its six-month exposure. But you’ll recall that women who had been randomized to placebo were re-randomized in a double-blind fashion to one of two doses of elagolix, 150 milligrams and 250 milligrams once daily.

Now the importance of the 250-milligram dose was that we had used our extensive dose response modeling based on PK/PD data from earlier trial to predict and select a dose that would help us understand what the upper end of the dose response continuum would be. As you know, with the 150-milligram dose, we had seen nice clinical efficacy and an excellent safety profile in our earlier Phase II study and of course through the Week 12 time point of the Lilac Petal Study.

The 250-milligram dose was very comparable to the 150-milligram dose as it relates to AE, adverse event profile and clinical benefit. But we were most interested in seeing if we could find a – if you called maximum tolerated dose and we assume that we would see that not with an adverse event or a clinical chemistry change, but rather with a subtle impact on DEXA scan, which was used to assess percent change in bone mineral density over six months. And obviously as we have discussed before, it’s the six-month interval that is informative as to these kind of subtle effects on bone mineral density.

And so the 250-milligram dose was predicted with the modeling that we have to give us an effect that would be close to pushing change in bone mineral density such that we would see a signal that we are right at the threshold of the percent change that we had discussed with the FDA.

As you recall from our 603 Study, the Petal Study, we had been very successful with the 150-milligram dose in the percent change from baseline, the mean change for spine and femur was low in the 0.1% to 0.6% change decrease from baseline. But the most importantly, the primary endpoint in the Petal Study was it’s a lower bound of the 95% confidence interval for that mean change did not exceed minus 2.2%. So that’s what we were mostly interested here with the Lilac Petal Study.

Obviously, the second three months of the trial was not placebo-controlled, it was everybody in a blinded fashion on either 150 or 250 and the 250 dose indeed showed a slightly greater percent change in BMD, minus 1% at the femur and minus 1.6% at the spine. These are subtle changes, nowhere near the kind of magnitude effect you see with drugs like Leuprolide or Depo-Provera at six months, similar to Depo-Provera, but nowhere near the 4% or greater that you see with Lupron. And the lower bound of the 95% confidence interval was minus 2.59%, so just over the minus 2.2% at the spine and minus 1.6% at the femur.

So you can see we’ve just kind of tickled the bottom of the – kind of the upper end of where we wanted to be with the 250-milligram dose and in fact, it’s exactly in keeping with the predictions that we had made with our dose response modeling. So very, very pleased with our ability to outline now the extent of the dose response continuum which puts us in a good place to move forward with our discussions with the FDA and the justification for a dose selection of our pivotal trials in 2010.

From an efficacy standpoint, the exploratory scales that we have talked about before, the daily scales for dysmenorrheal, non-menstrual pain and numeric ratings scale. Those performed exactly as you would expect. You may recall at Week 12, women had improved considerably compared to baseline on these three scales and we uncovered this statistical floor effect when compared to placebo on the non-menstrual scale.

And obviously what that means is the scores were so low that there was really no room for further improvement. I am happy that clinical improvement that we had seen at 12 Week was sustained for the full six months of this trial.

The scores at the end of the six months were very low, suggesting that women had marked in reduction in their pain symptoms related that related to endometriosis. The daily scale scores were in that kind of 0.5 range suggesting that they’re really at the bottom of the scale of the dysmenorrheal and non-menstrual systems and then a 1.6 range, I believe for the NRS scale on the ladder is 0 to 10, so it’s a 11-point scale. So women remarkably improved.

Obviously without a placebo group, I can’t do a placebo comparison, so it’s not really sensible to talk about P value, some post op you can do T test comparing months six to baseline and we see significant improvements on all those scales, but without a placebo group, it’s not particularly meaningful to make those kind of comparisons.

However, one of the scales that I think are useful to talk about are the patient global impression of change in which you truly are comparing the subject’s assessment of how much they have changed compared to baseline and if you use it conservative definition of responder, that is, women who say they are either much improved or very much improved, we see exactly what we have seen in the Petal Study, mainly they’re about 80% of women say they’re very much improved or much improved at six months compared to baseline.

Not surprisingly we see that the responder rate is about the same for both the 150-milligram dose and 250-milligram dose and this confirms what we have previously talked about mainly that you are getting this excellent clinical benefit at the 150-milligram dose with no additional benefit achieved with the greater suppression of estradiol.

To that end, the pharmacologic impact of elagolix is in keeping with what we predicted with our modeling, namely that the maintenance of estradiol at low physiologic levels is not only achieved with 150 or 250, but it’s maintained across the six months of treatment and that the median estradiol values at month six are in keeping with our modeling namely 41 picograms/ml for the 150-milligram dose and a lower 21 picograms/ml with the 250-milligram dose.

It’s interesting with the150-milligram dose we have very low percentage of women who have low estradiol levels below 10 or 12 picograms/ml, it’s in the single digits. Whereas with the 250-milligram dose, we see depending on how you cut the data and how you look at it between 15% and 20% of women who is estradiol median – median estradiol values below 10 picograms/ml or 12 picograms/ml. So exactly what the model are predicted, exactly what I hope to see with the 250-milligram dose and that still allows us to move forward very nicely.

Now the tolerability and safety of elagolix in this six-month treatment, that was quite good. The study conduct, we were very pleased with the overall – in the six-month trial with the treatment for endometriosis. You expect typically the literature describes about a 30%, 33% dropout rate, some files are little higher, some are little lower. In this elagolix trial, the discontinuation rate over the six months of treatment was 29% that includes a mix of both placebo and 150 and 250.

But overall discontinuation rate during the placebo-controlled portion was slightly higher in the placebo group than in the elagolix group. When we look at discontinuations due to adverse events, it was 2.9% for the 150-milligram elagolix group and 5.6% for the 250-milligram elagolix group. Those are very nice values for a program like this.

The kinds of adverse events that were reported during the clinical trial were consistent with what we have seen with all the other studies with elagolix. And as a reminder, to date, we have treated around 900 subjects with elagolix in various trials, over 500 women with endometriosis have been treated for up to six months duration, so it’s a substantial clinical database to date.

The most common adverse events reported in this trial and other trials that differentiate from placebo seemed to be consistently nausea and that’s at a low level, typically mild to moderate, rarely resulting in study discontinuation in this trial. It tends to be in the 7% to 9% range. And the other AE that’s reported more commonly than placebo is headache in this trial. Again it tends to be in the kind of 7% to 9% range, again mild to moderate, rarely resulting in discontinuation. And it’s actually strikingly low considering that nearly half of women who enroll in this trial have a history of migraine or headache chronically even prior to closure to study drug.

The only other, one that AE that seems to be in kind of that ballpark in the kind of 5% to 7% range and greater than placebo in this trial is arthralgia. I haven’t seen that in my other large Petal Study or earlier Phase II studies, so I am not sure if that’s just a unique to this trial. But we obviously we will keep track of that.

We don’t precipitate significant hot flashes, typically at 150-milligram daily dose, the frequency of hot flash is comparable during the single-blind placebo lead-in period, during the placebo period and then for the 150 during the treatment phase, they’re all in that kind of 0.5 hot flashes per day as a mean value.

At Week 24, the frequency was slightly higher due to a couple of outliners in the 250-milligram group and we’re in the process of analyzing that by now as the data is so fresh. But it appears that a couple of women may have reported slightly higher hot flash rate that brought that up to a mean of 1 per day in the 250-milligram group. But we will explore that further going forward. There were no safety signals evidenced from reviewing of the clinical chemistries, liver enzymes, hematology, urine analysis, ECGs, vital signs, all comparable to placebo, so a very reassuring about the safety profile of elagolix.

So as you can tell, we are happy that the clinical operations team here, the front desk team with the study drug, the regulatory group, everybody has done a great job in pulling the study off and keeping the program moving on schedule and on track. And we will submit abstracts of these study results as it became available for the upcoming scientific meetings. And as we delve into the database more extensively, if they’re interesting findings, I will be sure to keep you up-to-date on subsequent conference call.

Now, the elagolix program in general continues to move forward on track, on schedule as planned. We have the 703 Study or the Tulip Petal Study and I am happy to announce that we completed randomization for that trial in Central, Eastern Europe earlier this month, in fact just a couple of weeks ago.

Remember, we were waiting for the last woman to randomize based the onset of her menses. She had slightly longer than we expect the delay into onset, so we had to wait a few extra days, but she did randomize, and we now will plan on reporting the Week 12 placebo, Lupron, elagolix top line comparison information in late Q4, as previously discussed, probably just after Thanksgiving, but it depends exactly on what day the last visit is for here and just a quick turnaround of getting the soft lock on that database. Of course, subjects will continue to complete the entire six-month treatment of the Tulip Petal Study and that will have the final results of the six months in early 2010.

As you know, in that trial, we’ve gotten the opportunity to assess the impact of Leuprolide injections and we are comparing Leuprolide to placebo, so that we get a rough idea of how in this modern era with the modern data collection in current endpoints things behave, so we can begin our discussions with the EMEA. We assume that will have active comparator trials for European registration and we want to get an idea from both the Depo-Provera from our US Petal Study and Leuprolide from our Tulip Petal Study to begin those discussions with the EMEA.

To that end, we are engaged with a dialog with the regulatory authorities. As you recall from our March conference call, we had this interesting floor effect problem with the non-menstrual, the exploratory scale for daily assessment of non-menstrual symptoms and I have compiled the data which I have submitted to the reproductive division at the FDA. They are reviewing that data. We are engaged in exchange of email and dialog and I will be talking with them later this summer in more detail to obtain some clarification about best path floor for endpoints. And obviously I will let you know when we get some further detail there.

No matter the outcome of that discussions, I assume that we will have some clarity and that gives me some time to adapt accordingly such that we will submit our end of Phase II meeting request as planned after the 703 top line results and then expect to that the FDA will schedule will schedule our end of Phase II meeting in early 2010 as planned which will allow us to begin pivotal trials in the second half of 2010 as planned. So that’s moving forward nicely.

We are very pleased with the safety profile. We are very pleased with the sustained benefit over six months of treatment in multiple studies and we are very pleased to have the dose response continuum clarified. And so that’s the elagolix program. The other note there is that our preclinical group has continued to move things forward nicely with discussions with the preclinical authorities at the FDA and we will be initiating our two-year carcinogenicity studies on schedule as planned.

So outside of elagolix, we obviously have other clinical programs moving forward. I am very happy to report that our clinical trial application or CTA to the regulatory authorities of Health Canada was just approved day before yesterday. And so that means we will move forward as planned with the first in human study with our VMAT2 inhibitor, so the Phase I trial we will conduct in Canada, because we can get the most rapid turnaround for this initial study. This trial, our main interest is looking at the PK profile of this molecule. If it performs as hoped, then we get a very clean rapid go/no go decision and then we will move into the IND phase, so we can get rapidly to the proof of concept trial with US studies in 2010.

So that’s moving along nicely. The team did a great job and obviously that VMAT2 inhibitor program has come from some extensive in-house work and it allows us to go after CNS indications and particular we are interested in going after Tardive Dyskinesia, because of the unmet medical need and the opportunity for an orphan drug pathway.

Our Urocortin 2 program, even though as Tim mentioned, we had tightening on our spend here at the Neurocrine, I have been looking for ways of keeping the clinical aspects of Urocortin 2 moving forward.

As such, we have engaged three of our academic collaborators, one in New Zealand and two in Europe to see what we can do to keep this moving forward and I am happy that the cardiologist in Christchurch, New Zealand have successfully applied for regulatory approval and funding for a clinical trial in patients with acute decompensated heart failure in New Zealand.

And we are working with them, have contributed from the intellectual point of view with (inaudible) trial design and preclinical documentation and to support these initiatives, as well as clinical study material and study drug. And so it will be very nice to finally see Urocortin 2 in these acute decompensated patient that show up in the emergency room with fulminant heart failure. The two European projects are in discussion stages and I will let you know when those come to fruition.

Finally on Indiplon, after not getting any finalized notes back from the FDA, we have just moved ahead and engaged consultants to help us see if there is a liable path forward for Indiplon in a way back into the FDA to do something with the drug that we believe is safe and efficacious. And we are waiting for the additional feedback from some of these consultants and I will give you an update if we find a viable path forward in upcoming calls.

So I think that gives you an update. Elagolix moving forward well, nice study results; Urocortin 2, nice opportunity to do something without thus spend; VMAT2, on schedule for the first study and dosing in a couple of weeks; and Indiplon, engaging some consultants to see if we can find out viable path forward.

And with that, I will turn it back to Kevin.

Kevin Gorman

Thanks Chris. So that was a fairly detailed accounting of the six-month 702 study as we closed that down. So three Phase IIb’s each six months in duration, two of them completed and the results have been outstanding in both of them and right in line with our expectations for this drug. So now it’s is the – it’s the final one which is the 703 Study that’s – as Chris said is ongoing.

So at this point, what I would like to do is open it up for questions.

Question-and-Answer Session

Operator

Thank you. We will now begin our question-and-answer session. (Operator instructions). And our first question will come from Brian Abrahams at Oppenheimer & Company.

Brian Abrahams - Oppenheimer & Company

Hi there, thanks very much for taking my question. I don’t know if there were some subtle differences in the BMD changes that you observed at six months with the 150 dose in Lilac Petal compared to what you saw in the Petal Study. And I am just wondering how meaningful in your mind are those differences if at all? And just given this variability, how reliable the (inaudible) regulators do you think their view of six months bone mineral density studies would be?

Chris O'Brien

Thanks Brian. It is interesting. We are talking about variability. There is a variability in a DEXA scan and then for an individual subject which is significant. In fact, for a given individual subject, if you want to reassess the impact of an intervention sometimes for these kind of subtle changes of 1% level or 0.5%, you don’t even get a meaningful read until you go out for say, one to two years, because of the noise that’s around that.

But in our case, we are talking about the variability of the mean for a group of subjects on the DEXA scan and in fact that’s why the FDA, we have looked at the lower bound of a confidence interval being minus 2.2% as the threshold that we’re interested in. So anything within that round, whether it’s minus 0.9% or minus 0.6%, those – that is just noise. It is the difference mostly likely between the population of one trial and the population for another.

If you look at the range of change in BMD for individual subjects in our studies as well as Lupron or DMPA or others, you see that the range is actually incredibly broad. You see changes as much as minus 10% to plus 5% depending on if the woman is 42 years old or 21 years old, contaminate medications, if she’s a smoker, how heavy she is, some genetics. But the good news I think for us and one of the surprises to me is that if a woman entered our trial with osteopenia and keep in mind, we didn’t allow anybody in with the osteoporosis. But if somebody came in a T score of minus 1.4, they feared no better or no worse than anybody else in the trial. So the effects of elagolix were consistent regardless of the baseline BMD status of limit. So this is just noise. The mean value is what’s important from a regulatory point of view going forward.

Brian Abrahams - Oppenheimer & Company

Got you. And then just a follow-up Chris, can you give us a sense of maybe some general scenario such that coming out of this meeting – this upcoming meeting with the FDA, you would feel comfortable moving straight into Phase III versus scenarios in what you think maybe an additional emerging [ph] study might be beneficial.

Chris O'Brien

So in a general sense, if we come out of our discussions and the endpoints that the agency is truly interested in are ones that has clinical experience with, then we can – we don’t need any additional in part we can move straight away. And in my case, I would assume I would go with an SPA just to note down and then obviously we engage our partner with that process, because as Kevin has pointed out before, we don’t want to start a Phase III trial without the appropriate resources to complete the Phase III program.

The – if after our discussions, we have clarity on the endpoints and there is some subtle changes to wording or whatever or if we come up with the way of handling the non-menstrual symptoms that I haven’t had clinical experience with, then I might want to do is small exploratory test of that modification and I can handle that in the timeframe that I’ve already outlined without delay of the plan for into Phase II and start as pivotals that I have already outlined.

I have well over a 100 very good investigators in sites with a significant pressure of subjects that are interested in receiving elagolix, such that I could test out what – enough that I would need do power calculations for pivotals with any kind of change that the FDA would come up with, so looking forward to that. Obviously when we get clarity whether we are moving more rapidly to Phase III or testing that hypothesis and keeping on track to Phase III, I will let you know.

Brian Abrahams - Oppenheimer & Company

Great. Thanks very much for the clarity.

Operator

We will take our next question from Phil Nadeau at Cowen & Company.

Phil Nadeau - Cowen & Company

Good morning. Thanks for taking my questions. I also have a few questions on elagolix. First is on the 150-milligram dose. Could you let us know what the lower bound the 95% confidence interval was in the spine and femur there? I think that’s the last piece of data that we are looking for.

Chris O'Brien

Let me find that in my notes here. Okay, this 150 spine lower bound was minus 1.6 at the Week 24. And then the femur is minus 1.4 at Week 24.

Phil Nadeau - Cowen & Company

Great. And then, the second question is on adverse events. You mentioned the adverse events that were different versus placebo, but it sounds like those really led to discontinuation. So what were the predominant adverse events in the trial that led to discontinuation in the 150 milligram and 250-milligram doses?

Chris O'Brien

I think there were one or two. I am sorry I don’t those in front of me. The most common, I think that two of them were the symptoms of endometriosis. Women had insufficient pain relief that they decided to go on get a contraindicated intervention or a hysterectomy or a surgery. We had – I apologize, I just didn’t bring those to have on hand.

But what we did – I can tell you what they weren’t. The weren’t women who were suffering from excess suppression of estradiol, so we didn’t see hot flashes or lots of (inaudible) and some things that one would see with a menopausal state induced by GnRH agonist for example. And we – I am actually trying to think what else. I apologize, well, I just don’t have in front of me.

Phil Nadeau - Cowen & Company

That’s helpful. No loss. Thanks for that. And then last question is on the two-year carcinogenicity studies, can you provide us some of those species you need, is it two (inaudible) species or do you need two primates or anything?

Chris O'Brien

No primates.

Phil Nadeau - Cowen & Company

Okay. And given that these are two-year studies and they are beginning now, is it safe to say that they’re probably as you could file for FDA approval elagolix would be sometime towards the end of 2011, is there anyway that you could file earlier than that without the two-year carcinogenic studies being completed?

Chris O'Brien

No in fact the carcinogenicity studies are not being rate limiting element of the NDA submission. As I have mentioned, I think in the past, the expectation for an NCE like elagolix in a non-life threatening condition like endometriosis is that we fully conform to ICH guidance that we have two large efficacy pivotal trials that are six months in duration, plus some post treatment follow up and that will probably have a one year treatment safety data from the safety trial. And if these are all running concurrently and the time to then analyze the data assemble the NDA and do the submission, I think we have talked about 2012 as the timeline.

Phil Nadeau - Cowen & Company

Great. That’s very helpful. Thanks for taking my questions.

Operator

Our next question comes from Tommy Nuane [ph] at Piper Jaffray.

Tommy Nuane - Piper Jaffray

Hi good morning, guys. I am here for Thomas Wei. Thanks for taking our question. I just had a small follow up on the bone mineral density question and you alluded to osteopenia. I wonder if you can just comment on the rates of osteopenia in this younger population and specific disease population, how this would relate from your population in the trial versus historical data?

Chris O'Brien

Thanks Tom. That’s actually an interesting and somewhat complicated, because there is opacity of data on this population and endometriosis in particular. Osteopenia as you know is just a defined as a T score that’s suggesting a subtle difference in DND from the mean values for a 30 year old otherwise healthy women. And if you just do a cross section of women in their 20s, you see not 1% of osteopenia. If you move into your 30s, it goes up and into your 40s where there is a considerable prevalence of osteopenia.

So what we see with elagolix at the end of six months is a small percentage – I don’t have in front of me, but it’s in the single digits somewhere in the range of I think 6% or 7% of women that would technically qualify for osteopenia, but that’s the same as you will see in a placebo group when you look at the distribution of ages that we have in our trial, because obviously we have somewhere in the 40 years, 41 years of age and someone in at the low end of mean age is 30 years, 31 years.

And in contrast, if you look at the number of women that meet the criteria for osteopenia with DMPA or Lupron obviously that’s considerably higher. So it’s a good question. It’s important to keep that in mind and what see with elagolix, particularly 150 is exactly what we would expect to see in that population. There is some data that suggest women with chronic disease especially autoimmune or inflammatory disease at one year, even women in their 30s have about 1% bone loss without any intervention at all. So I am seeing figures like we have with 0.5% bone loss, actually puts that quite nicely.

Tommy Nuane - Piper Jaffray

Thanks. That’s very helpful guys.

Operator

(Operator instructions). Larry Smith at DLS Research. Your line is open sir.

Larry Smith - DLS Research

Hi, I think you get this question every time about whether you have any information on the disease characteristics of this product. But can you give us any insight into whether you followed women who completed six months of therapy to be able to determine whether there is a change in lesions, whether a pain is still significantly different from baseline. And also, have you seen anything are you able to make any kind of observation on whether bone mineral density improves after elagolix is withdrawn? And I guess finally, have you seen any kind of unusual events in these women in the post treatment?

Chris O'Brien

And so thanks for that question. I can answer that from our Petal Study. The 603 Study, as you recall six months of treatment, six months of no treatment and then for a small subset, we have even followed them out to Week 72, so an additional six months. And for the group that we followed out for six months post treatment as it relates to pain, we have seen that, in fact the pain scores as a quality of life scores and other measures show sustained and clinically meaningful improvement even six months after no treatment, even to the point that for many women, they wouldn’t qualify for enrollment in the study. They wouldn’t meet entry criteria, they’re still that much better.

Now you asked also about lesion, we did not go back and do the so-called second look laparoscopic visualization of lesion counts and types. That was popular 10 years ago and people believe that will be a way of trying to look at disease modification, since then there is ample literature that shows that that’s not terribly useful because of the vagaries of lesion counting in general and the very poor correlation between lesion count and clinical symptoms and there is absolutely no correlation between lesion characteristics such as, is it hemorrhagic or a scar or (inaudible) or whatever and clinical symptoms.

So we know that although an older drug like Leuprolide had in this label that there is a reduction in lesion count, we know from our discussions, we have been key investigators and regulatory authorities that we would not get a disease modifying label now based on just lesion count.

Unfortunately, there are no good biomarkers for disease modification for endometriosis that are currently available and agreed upon by regulatory authorities. We would love to do that. And it’s obviously in my development plan that we are looking for these biomarkers and collecting proteomics and other kinds of data. But at the moment, that’s not a regulatory path that’s viable in the near term. We will obviously try to go after that for label enhancement as the science will support.

And finally you asked about bone change in six months and follow-up, since we didn’t see much if any bone loss in the 150 group, you can’t look for really any improvement. What you see at six months with 150-milligram elagolix is basically what you see at 12 months after additional six months in another treatment.

Now with the 250-milligram group and because there is a slightly higher number, it will be very, one would expect that and you would see a return toward the baseline mean, but I don’t have that data, we obviously didn’t have 250 milligrams in the Petal Study. So I hope that answers your question.

Larry Smith - DLS Research

Yes, thank you.

Kevin Gorman

Okay. So we’ve gone a bit of over and so we are out of time. I do appreciate everyone’s participation this morning. As you can see, our guidance at the beginning of the year, we continue on virtually every front, our burn is well controlled, we remain in a very good cash position.

Elagolix, our lead program can – the drug continues to perform very well in the clinic, it’s displaying substantial and importantly sustained efficacy in two six months trial and it’s very well tolerated by the endometriosis which is a big departure from the currently available drug out there for endometriosis. And we continue to push forward in our other programs.

So I would like to thank you all for your participation this morning and we look forward to talking to you throughout the rest of the summer as we get more clarity from the FDA and as our programs continue to move forward. Take care.

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Source: Neurocrine Biosciences, Inc. Q2 2009 Earnings Call Transcript
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