Kevin Gorman - President and CEO
Jane Sorensen - IR
Tim Coughlin - VP and CFO
Chris O'Brien - Chief Medical Officer
Brian Abrahams - Oppenheimer & Company
Craig Gordon - Cowen and Company
Neurocrine Biosciences, Inc. (NBIX) Q3 2009 Earnings Call October 29, 2009 8:30 AM ET
Good day everyone and welcome to today's program. Neurocrine announces third quarter 2009 financial results. At this time all participants are in a listen-only mode. (Operator Instructions). Please note this call may be recorded, I will be standing by in case you need any assistance.
It's now my pleasure to turn the conference over to Kevin Gorman
Thank you very much and good morning everyone. Today I am joined by Chris O'Brien, our Chief Medical Officer; Tim Coughlin, our Vice President and CFO and Jane Soresen, Investor Relation. We are going to run you through this morning our third quarter financials and our year-to-date and then we are going to spend time with Chris taking you through the progress which has been significant since the last call on all our clinical programs in the company.
Before we get started I would like to ask Jane to read out Safe Harbor statement.
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, included 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.
Thank you, Jane. Tim?
Thanks Kevin and good morning to everyone. We released our financial results for the third quarter yesterday afternoon we remained on plan from a financial standpoint. Our launch for the quarter was $8.2 million or $0.21 per share based on 39 million shares outstanding. For the same period last year, we had a loss of $17.7 million or $0.46 per share.
Our year-to-date loss is $1.11 per share compared to $1.56 per share last year. We are slightly ahead of budget for the year based on expense management efforts throughout the company. Research and development as well as general and administrative cost were inline with our expectations and significantly lower than the prior year due to lower personnel cost, lower external development cost and professional service cost. We continued to invest in our GnRH program kicking of the 901 Daisy Petal Study and also our VMAT2 program with our Phase I work in Canada.
As we have explained during the first and second quarter calls. There are a couple of accounting nuances that one have consider when comparing 2009 and 2008 numbers. They all relate to have your required accounts for the building in 2008 versus 2009; 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 began to recognize a 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 record rent on a straight line basis over the terminal lease. And this adds approximately $200,000 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 $63.7 million in cash and investments. During the third quarter, we added in the two significant financial agreements. The first agreement was our Committed Equity Financing Facility or CEFF with Kingsbridge. We're the first company to negotiate in [warrantless] CEFF of Kingsbridge or we plan to follow [S3] today with the SEC to finish all the applicable terms of this agreement.
The second agreement was amendments for building lease that was effective September 25, 2009. This amendment will save us approximately $27 million over the term of our lease agreement and also ship to the certain liabilities from short-term to long-term. We will follow our 10Q today with the SEC and with that I'll turn it back over to Kevin for the balance of the call.
Thank you, Tim. Actually now it would be good time for Chris to bring us all up to speed on all of the programs in the progress today particularly with our VMAT account elagolix programs.
Thank you very much Kevin. Lots going on as you mentioned earlier since our last call. I'm very happy with the progress that's being made across multiple funds as you are aware we have Urocortin 2 our Phase II program that is currently in development for patients with Acute Decompensated Heart Failure.
And as mentioned in previous calls we have been keen to move from the stable heart failure patient populations into patients with Acute Decompensated Heart Failure and our long-term academic collaborators in the Christchurch, New Zealand at the Cardioendocrine Research Group have initiated a clinical trial in patients with the acute decompensated heart failure. And this trial began recruiting patients earlier this quarter and enrollment is expected for approximately 50 subjects. So very happy with the progress made on that front as we continue to move the Urocortin program along.
Little closer to homes in New Zealand and North America is our VMAT2 program. As mentioned on our last call we had prepared and filed a clinical trial application or CTA in Canada for our first Phase I study, this is a single ascending dose trial. And the key here for us with the VMAT2 program is not a question of mechanism we know that VMAT2 inhibition is effective for a number of central nervous system disorders and our goal of this program is to go after an unmet medical need in a condition called tardive dyskinesia. So we know VMAT2 inhibition can be effective but there are no approved drugs for TB and there are some problems with current VMAT2 inhibitors that render difficult for this population.
What we need is was a drug that had a good safety profile and a very specific pharmacokinetic or PK profile so the Phase I program offered an opportunity for us to have very crisp go/no go decision points. The first with the single ascending dose trial, the CTA was approved this summer. We actually have enrolled in and done very nicely with the Phase I single ascending dose trial in Canada and we will be reporting results from that trial a little later this quarter.
The key for us is if the drug has the desired safety and PK profile, it’s a go decision, then we move immediately into the repeated dose trial in Q1 and this is to make sure we have again the key Safety and PK profile desired with repeated daily dosing for this a once a day compound. If that PK profile holds up through the repeated dose of Phase I trial, then we file an IND and hope to begin the proof of concept trial in tardive dyskinesia in 2010 as discussed in the past. So, very pleased with the progress that has turned with the VMAT2 program and we’ll let you know whether we have a go/no go decision as we get the PK and Safety results from the single ascending dose trial.
Let’s move on to the Elagolix program. As you know this program has continued to move forward quite nicely. We’re actually now close to some near 900 subjects who have been exposed to Elagolix more than 500 patients with endometriosis with treatment for up to six months. So, we’ve been very pleased with the progress. As you know we’ve seen nice data supporting efficacy across multiple monthly scales and daily scales including dysmenorrhea, dyspareunia or painful intercourse, Patient Global Impression of change and the validated endometriosis health profile. What we reported earlier this year was that in the Lilac Petal Study one of the daily scales non-menstrual pelvic pain at daily scale that the FDA asked us to try was associated with a very low baseline score at the beginning of the Lilac Petal Study and therefore on that specific scale we were unable to show much improvement in symptoms and that’s obviously a problem of patients who didn’t have symptoms can’t get better. There were lots of women's who had very minimal non-menstrual pelvic pain at least as assessed by that specific scale.
So, as you know we took that data along with our other clinical information and output from various patient interviews and focus groups and we met with the FDA in August at a Type C meeting. We shared our data and based on the discussions at that meeting, we modified the non-menstrual pain scale to more appropriately reflect our patients experience pain on non-menstrual days. The scale was then immediately placed into a study that we had set up in the anticipation of the output from this meeting, the 901 or a Daisy Petal Study and within a couple of weeks of the FDA meeting we actually began enrolment in that trial. So, the team here had done a very nice job in getting that up in place as a Phase II study in advance we amended the wording of the scale and immediately got going. And I'm very pleased with the way the recruitment in that the trial is going. We have utilized our best investigator sites here in the US and originally our expectation was that this trial would give us a very nice lead on how the scale was performing, the utility of the modifications and we would use that information and the statistical characteristics of that, the variance and the variability of the scale to help us estimate the sample size to the Phase III study.
So, the recruitment has actually because it’s been so well in a blinded way we’ve actually looked at the screening scores that women collect as they are going through the screening phase of the study before randomization and we are very pleased to see that, in fact that the modifications to the scale have achieved what we have hoped mainly that there is a much wider dynamic range women have a more likely to have scores in the moderate to severe range than they had with the previous version of the scale and this seems to reflect indeed more appropriately how women experience their symptoms on non-menstrual days.
This actually was encouraging and we sat down with the status (Inaudible) and said okay, here is what we’re seeing in the screening data, what would it take to get more robust and more informative information out of this trial than simply getting directional information that we originally intended for sample size estimates and the stat group came back and said the current population of 80 subjects gives you directional information. If you had 120 subjects in this trial you should be able to have more adequate power to talk about statistically meaningful separations those of placebo and Elagolix even on the non-menstrual pelvic pain.
So, we amended their protocol as the recruitment is going on and we will be recruiting for a population of 120 subjects. So, this is going well, this adds few maybe eight to 10 weeks I think to our recruitment time lines. But all in keeping with the intent of taking the 901 study data along with all the other Phase I and Phase II trial data and requesting at the end of Phase II meeting with the Division of Reproductive Products at the FDA in Q2 of this year.
So, the goal as we’ve said before is to get formal kind of PDUFA buy in to these scales and end point analysis by the FDA with the end of Phase II meeting and the SPA or Special Protocol Assessment that will allow us then to proceed to Phase III. So, 901 study recruitment is going very well. The preliminary look at the screening data says the wide dynamic range of the scale is much more appropriate and in fact is favorable enough that we can power the study to give us the kind of results that should be very robust and informative and allow us to get to our end of Phase II meeting. We’ll request that end of Phase II meeting as soon as we read-out from 901 comes and well that is anticipated in Q2 of 2010.
So, very nice progress on that front, a couple of other things on the Elagolix program, as you know we have the 703 study or the Tulip Petal Study winding down in Central Eastern Europe. We are in the midst of the QA and QC process for the Week-12 data and we’ll be reporting that data as soon as it unblinded little later this quarter. And the patients finish out one through their week 24 and week 30 visits coming up in the very near term of that six months trial. And then finally some of our clinical safety and efficacy data was recently reported and well received at the American Society of Reproductive Medicine. The meeting was held in Atlanta, Georgia last week and we presented some of the petal study there to good review.
So, very nice progress in Elagolix, very nice progress in VMAT2, progress with the Urocortin 2 and we look forward to keeping you updated as we have the 703 results later this quarter. Kevin?
Thank you very much, Chris. So as you can see this was been a busy quarter for us, quite a bit of work has been done and I've got to say that I'm very pleased with the results that we are already seeing out of the 901 study at least and far as blinded screening data goes as Chris has mentioned.
At this point let's open it up for questions.
Thank you. (Operator Instructions). Our first question comes from Brian Abrahams with Oppenheimer & Company.
Brian Abrahams - Oppenheimer & Company
All right, thanks very much for taking my question and congratulations on getting the Daisy Petal study started so quickly. I have couple of questions regarding some of the modifications, the amendments that you have made to that study I guess. Can you give us a sense of what your initial target was for the mean base line score with this modified pain scale?
In the clinical trial, you have certain assumptions that go into any kind of simplified estimate in power calculation. And we know that for these 0 to 3 scale there are 4 point scales that the FDA has been in favor of and we know that a moderate to severe is a score of 2 or greater for things like dysmenorrhea which is the most disabling and intense symptom of endometriosis. We typically see scores in the 2, 2.5, 2.6 range and that’s indeed what we are seeing here.
As you know in the Lilac Petal Study with that version of the scale, about 40% of the daily values during the placebo lead-in period were zero and 40% of the values were one. And the base line value on the non-menstrual days was kind of 0.83 or if you look at all days rolled up it was 0.9. That value just doesn’t give you any room to improve. So what we have done with this population in 901 is make sure that the scale is appropriate that has a wide dynamic range and that women enrolling in the trial are women who have moderate to severe endometriosis with moderate to severe and non-menstrual pain and moderate to severe dysmenorrheal. And such I would expect the main scores to be somewhere in the 1.5 to 2 range considering that most women with moderate to severe endometriosis only have about 8 to 10 days per months of non-menstrual symptoms.
Brian Abrahams - Oppenheimer & Company
It seems like you are in a better place than you were with the prior scale but I am just wondering if you think the modifications were as successful as you had hoped where you hoped. I do hope to fall into the closer to the two to three range for the value to detect a greater difference.
No because as I mentioned women even with severe endometriosis typically report only eight to 10 days of a say a 20 to 25 days a month with non-menstrual pain. So, they have days of no symptoms or every mild symptoms and so one of the other things that we have enjoyed in our discussion with the FDA is that may be mean scores are not the best way to assess non-menstrual pain. If you have many zero days per month but you also have days of two and three your mean score may be 1.2. Is that the best statistical method? And the FDA told us may be that’s not the best way to do it. May be a responder analysis would be a more appropriate way of assessing this kind of scale.
So, they have given us some latitude in how we will do the statistical analysis for these endpoint. One other piece of that just to emphasize this is in fact confirmed what we know about non-menstrual pain. Even in our previous studies for example 603 or petal study, where we use the monthly scales, the monthly recall scales such as CPSSS. Non-menstrual pain is typically in the 1.8 region even on the monthly scale of that old version whereas the monthly look back for dysmenorrheal within the 2.3 or 2.4 region.
So I am very comfortable that this is appropriately reflecting how women suffer and we have some options of how to work with this including both a mean change from baseline as well as responder analysis.
Brian Abrahams - Oppenheimer & Company
Got you. Okay, that makes a lot more sense now. One more quick question, then I'll hop back in the queue. Can you help us understand what influence the decision to now expand the study, obviously its going to push back timelines for the results at the end of Phase II and presumably the start of the Phase III? Can you just maybe help us understand why you decided now to try to achieve statistical significance rather than just achieve results that will give you a sense of (Inaudible) for the Phase III, I mean is your thought that maybe this study could be potentially considered one of the pivotal studies? Just help us understand your thoughts on that.
I don’t think this would be considered a pivotal study in that. We know from our discussions with the FDA that we need to get to the end of Phase II and SPA This include the support of trial obviously and add tremendous weight to the NDA when we get there, but my anticipation is that we will still go ahead with the full Phase III program as planned and that’s a program that as you know from previous comments we won’t begin the Phase III trials until the partnership deal is done. I think to be honestly the utility of the expanded sample size doesn't change anything for me about the trial, its still giving me what I need to go into Phase III but as you know we've kind of been beaten up by people and it adds a robustness and some weight to the Phase II study that will probably be useful.
(Operator Instructions). Our next question comes from Craig Gordon with Cowen and Company.
Craig Gordon - Cowen and Company
Just a couple of questions for you; first because you guys have modified this daily non-menstrual pain scale is this I guess is asking most focus on this is this they are really preferred and [point] for the Phase III or are they just trying to get a better feel as to whether or not its about end points as we know that this has not been typically used in the past.
Couple of important points; in fact the reason we’ve had these discussions with the FDA is because all the other aspects of assessment in particular dysmenorrheal, dyspareunia, analgesic use all those other things have been sorted out and till what we’re talking to the FDA is the one piece that we needed to get some clarity on because of the problem that we uncovered with the conversion from the monthly scale to the daily scale. All of these things in fact are not new, the reason we have dysmenorrhea and non-menstrual pain is because these are the components of the old B&B scales that have been used for decades since the early 1980s and these are the scales that were used for the approval of Lupron, Depo-Provera, Danazol, Clinoril et cetera. In fact so these are not new scales, these are new twist to the scale and specifically requested by FDA to change from a monthly dysmenorrhea to a daily dysmenorrheal, from a monthly non-menstrual pain to a daily non-menstrual pain and some modification to the wording. So, it is the fact that FDA considers these modifications of the B&B scale that allows us to proceed with the testing plan as we’re doing it now.
The thing that the FDA has been very clear about not only to us, Neurocrine, but to other sponsors who have worked in the endometriosis space is that they consider the treatment of pain a very important aspect of endometriosis and they want therapies, new therapies, effective therapies that will treat both dysmenorrhea and non-menstrual pain and that’s we have had so much back and forth with them. Its relatively easy to get a drug that works on dysmenorrhea, the trickier part has been non-menstrual pain partly because of the variable and intermittent nature of that symptom among women with moderate to severe endometriosis and so that’s why we’re doing what we are doing.
Craig Gordon - Cowen and Company
In terms of partnering the SPA and having to conduct the Daisy trial when do you and of course I know the [hinges] of a partnership. Is it still seasonal to start a Phase III inch in the second half of 2010 or do you think that’s possible or likely that’s going to slip into 2011?
No, the plan is still 2010. As I mentioned the modification to the sample size for the 901 study, it adds I don’t know 10 weeks or so to the program and so we will request, the goal is to request and end the Phase II meeting and to submit that request in Q2 in parallel with the SPA submission. And with output from the end of Phase II and SPA, sometime presumably in summer, we will have the opportunity of starting a Phase III program in the second half of the 2010.
And everything else that has to do with the program that goes into starting of Phase III trial is being done will be completed in time for that such as the manufacturing of clinical trial drug. So, that is all going on and including all the planning stages for the registration batches that are necessary for that. And the entire preclinical program is actually completed except for the two-year cross genecity studies which were ongoing right now in both rat and mouse.
Craig Gordon - Cowen and Company
Okay. And if I made -- I'm sorry go ahead.
No, that was it.
Craig Gordon - Cowen and Company
And then if I may, just one other question. Is your projected cash fund for the year, is that remaining $50 million to $55 million, can you give us an update on that?
That’s remaining at that number.
Craig Gordon - Cowen and Company
Okay, great. Thank you very much and congratulations.
So, I'd like to take this opportunity right now just to reiterate, it was only a last quarter when we had spoken. There was a significant amount of uncertainty around this program. We had report of the trial results in which we had clearly demonstrated efficacy in a number of end points. But there was one that we still needed to hit and that was the non-menstrual pelvic pain. We had not yet met with the agency at that point in time.
We've shown throughout this entire program that the drug works and it works as well as the gold standards. We did a head to head non-inferiority trial and given some DMPA and showed that we were as good as DMPA, which was as good as Lupron in its non-inferiority trial. But in this one short quarter, we were able to meet with the HNCA and have an extremely productive meeting with them. We have nailed down an end point that we did, we came about through all of the clinical trial data that we had.
But in addition we had performed a number of individual patient interviews and a number of focused groups with patients. So that we could better understand how they suffer both in dysmenorrhea and particularly in non menstrual pelvic pain and to get their reaction to different types of ways to uncover the way that they suffer. We took all of this work to the HNCA and they appreciated that very much and we suggested to the HNCA pass forward with this revised language. And I must say that its language that actually takes us back closer to the original CPSSS or [B&B] source which we've always set up on and the agency appreciated that.
And that's why we are so pleased now that I am getting this blinded look at the base line scores that this is actually responding extremely well we are coming up with a baseline score of approximately 1.5 that’s not terribly different than what we saw with the monthly scores. And one of the agencies involved in getting away from the monthly scores is wanting to get a away from look back buyers. So we seem to have been able to do that and yet be able to use the entire dynamic range of the 0 to 3 point scale.
So in one short quarter, we have been able to I think remove a tremendous amount of uncertainty that existed in the program and we are well on our way in this trial. The delay if you want to call it a delay but I look at it more as just building even more certainty in the programs continuing to remove risk whenever we have the opportunity to do it. And that was the main driver for increasing the sample size in this study so that we can come to the agency with approximately six Phase II studies, two Phase IIas and four Phase IIbs when we come to the end of the Phase II meeting and that would be nearly a thousand subjects will have be (Inaudible) at that point in time.
And also I will be presenting at the Oppenheimer conference next week on Tuesday and I will be showing quite a of bit data at that Oppenheimer conference that perhaps we haven’t seen previously. Then one last thing I do have to say is that the other program in one quarter that we have got going pretty robustly is our VMAT2 program.
And as Chris has said we have filed CTA as of our last call and now we have actually dosed two entire patient groups in that study. So, that is a program that we are very excited about because of the indications that it is in. Its right in the sweet spot of Neurocrine and then neurological indication particularly in movement disorders and a number of indications therein in the high end medical need there.
So, having said that I would like to thank you all for your participation this morning and I forward to talking to you all in the future. Thank you very much.
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