Neurocrine Biosciences' CEO Discusses Q4 2013 Results - Earnings Call Transcript

| About: Neurocrine Biosciences, (NBIX)

Neurocrine Biosciences, Inc. (NASDAQ:NBIX)

Q4 2013 Earnings Call

February 6, 2014 5:00 PM ET

Executives

Kevin Gorman – President and CEO

Jane Sorensen – IR

Tim Coughlin – CFO

Chris O’Brien – Chief Medical Officer

Analysts

Alicia [ph] – Deutsche Bank

Phil Nadeau – Cowen & Company

Ian Somaiya – Nomura Securities

Thomas Wei – Jefferies & Co

Charles Duncan – Piper Jaffray

Marko Kozul – Leerink Partners

Yigal Nochomovitz – Morgan Stanley

Robert Hazlett – ROTH Capital

Jon LeCroy – MKM Partners

Operator

Good day, everyone, and welcome to today’s Neurocrine Biosciences Reports Fourth Quarter and Year End 2013 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 session. (Operator Instructions) Please note this call is being recorded, and I will be standing by should you need any assistance.

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

Kevin Gorman

Thank you. And thank you everyone for joining us this afternoon for our earnings call. I am joined here as usual with Tim Coughlin, our CFO; and Chris O’Brien, our Chief Medical Officer.

Before I get started, Jane, could you read our Safe Harbor statement?

Jane Sorensen

Sure, good afternoon. I want to remind you of Neurocrine’s Safe Harbor caution. 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?

Kevin Gorman

Thank you, Jane. Before I turn it over to Tim to go over the financials for the quarter and the year-end, and then Chris to give a brief update on the programs, just a couple of words. Number one is that it has been a very good quarter for us. We’ve had a chance to discuss extensively with our investor base and all the analysts to cover us the data from the Kinect 2 study, which was very successful. And we’re quite pleased now to be taking that program into late-stage clinical trials following our End-of-Phase II meeting with the FDA just a little in the second quarter of this year.

Also we’re very pleased that AbbVie continues to move ahead with both the elagolix program, both in endometriosis having both trials started, and also the uterine fibroid Phase IIb study going well.

So Chris, will talk a little bit more about those, but first Tim, could you go over the financials?

Tim Coughlin

Sure. Thanks, Kevin. Good afternoon to everyone. As Kevin mentioned, we made a lot of progress for the last three months, successful Kinect 2 study. We’re ramping up now for the End-of-Phase II meeting with the FDA and we continue to advance compounds closer to the clinic.

From a financial perspective, we met our recently increased year-end cash target, and we also met our projected burn from operations. We ended 2013 in a very strong financial position with a $147 million in cash, investments and receivables. And that yielded essentially a net burn of $41 million for the year. We began 2013 with $188 million in the bank.

Our GAAP net loss for 2013 was $46.1 million or a loss of $0.69 per share, and that compared a net income of $5 million or $0.08 per fully diluted share in 2012. Our net loss for the last quarter of 2013 was $10.6 million, $0.16 loss per share, and that compares to a net income of $9.5 million or $0.14 of income per share in the fourth quarter of 2012.

When comparing both the quarterly and the annual results for the same periods in 2012, the major contributing factor in the change in operating results is a reduction in revenue earned under both the AbbVie and Boehringer Ingelheim collaboration agreements. Our active participatory efforts under both of these collaborations ended as planned during 2012.

Our revenues for the fourth quarter 2013 was $700,000 and for the year – for all of 2013, it was $2.9 million and this is in line with our guidance for the year.

Our R&D expenses for the past quarter were $8.9 million. For all of 2013, they were $39.2 million. That is 5% annual increase over 2012 R&D expense levels and was driven primarily by the efforts around the VMAT2 program.

G&A expenses remained relatively consistent at approximately $3.3 million run rate over the past eight quarters.

We continued to keep a tight control of our expenses. We ended 2013 with 81 full-time employees, slightly up from the 78 at the end of 2012. We expect to add approximately 10 additional full-time employees, primarily all in R&D during 2014.

For 2014, our financial guidance as we expect in the year with $100 million in cash and investments. We expect the GAAP net loss from operations of approximately $56 million to $61 million or $0.82 to $0.90 per share based on 68 million outstanding shares. We anticipate no revenue in 2014.

Our expense for the year approximate $60 million to $64 million offset by approximately $3.6 million in other income. These budgeted 2014 expenses contemplate the launch of our Phase III program for VMAT2 in tardive dyskinesia, as well as the preclinical and clinical work in the Tourette program.

We expect an increase in non-cash share-based compensation from $6.8 million in 2013 to $10.8 million in 2014. This $4 million increase in share-based compensation expense is driven entirely by an increase in the Black-Scholes valuation of recently granted options and restricted stock units.

This is due to the higher strike price for options and restricted units based on the grant date valuations of January 16 of this year. But the share-based compensation expense also represents a majority of the difference between our expected GAAP results and our anticipated cash burn.

So that concludes the prepared remarks and the financial results. We’re in a strong financial position. We have retained our financial discipline in the 2014 budget. Our 10-K should be on file with the SEC shortly, and I’ll be happy to entertain any questions related to financials during the Q&A. So I’ll turn it back over to Kevin.

Kevin Gorman

Thanks, Tim. So as Tim outlined here, there are no surprises in the financials. The year went exactly as we had outlined it, albeit with bit more cash in the bank when we ended last year. So Chris, would you like to give an update on R&D?

Chris O’Brien

Thank you, Kevin, and thank you for the participants on the call. As Kevin mentioned, it’s been a good quarter, not just with the Kinect 2 results, but with – across the board with our programs. With respect to elagolix and AbbVie, as Kevin mentioned, there are two ongoing Phase III trials in endometriosis. The first trial of course is primarily a U.S. trial, North American trial. And the second study is a study covering many ex U.S. countries. The details are outlined in the press release that we issued earlier this afternoon.

We’re very pleased with the work that AbbVie is putting into the endometriosis and uterine fibroid program, and are very pleased, not just in the running of the clinical trials, but the supportive work with respect of health outcomes and health economics and all the ultimately necessary ingredients to get this product successfully launched.

With respect to the VMAT2 program, of course the Kinect 2 results were the catalyst that were necessary for us to understand that we had addressed all those key points that a company needs to have in hand when they go into an End-of-Phase II meeting. So we have a good understanding of, who the patients that are appropriate subjects should be for Phase III trials. We have a good understanding of the study design characteristics. And then as you recall, we had a steady learning curve as we worked our way through Phase II development in tardive dyskinesia.

No one has successfully registered any drug for the treatment of tardive dyskinesia. So we had no track record or pathway that had been carefully laid out before us. And we had to sort out a lot of the issues surrounding registration path for tardive dyskinesia. And I think we’ve been successful in understanding how one mitigates that placebo affect magnitude in clinical trials, how to recruit and find appropriate subjects for these trials. And most importantly for us, how to assess dyskinesia in the context of a clinical trial. No one had been successful in using any kind of validated endpoint or scale for the assessment of dyskinesia. And the scale that we have, the AIMS’ scale was validated and developed back in the 70s and initially used as a safety scale.

So great progress made there, and I am very excited as we prepare the package of material that will go into the division of psychiatric products at the FDA for End-of-Phase II discussion. And just to give a little bit of clarity on what happens there. So the Kinect and the Kinetic 2 study are – there are some post-completion activities around those two studies that are ongoing now, while we close out and clean up and finalize all the data and the analysis. At the same time, we take the pooled PK and PD data that is AIMS score changes and exposure information, and we’re working closely with our outside PK, PD modeling consultants, some ex-FDA gurus in this area.

We take this information and take our PK, PD model to help with our data-driven decision of which doses we put into protocol – the Phase III protocol. So we take this set of clinical data, we take some additional Phase I data that we have now in hand from our hepatic impairment special population study, from our drug-drug interaction study and the additional Phase I work, and we take some additional pre-clinical data that has come out of our Group here at Neurocrine. And that becomes the package of information that we submit to the FDA in the second quarter, and they grant us the meeting date, 60 days after the meeting request is a general timeline that they are working with.

So sometime later in Q2, we look forward to sitting down face-to-face with the FDA and look forward to showing some of the subject videos that have been participants in the Kinect and Kinect 2 trials, and we present them our proposed Phase III protocol.

Based on that meeting, we see consensus on the aspects of Phase III program and what is necessary to get to an NDA. And then the outcome of that meeting, the FDA has some time to respond with additional comments or minutes. We incorporate that into a final program and then we can go out and start on working with the institutional review boards and all the aspects for Phase III.

We are currently in the process of identifying and qualifying additional clinical trial sites to help us with our Phase III program, and developing educational materials for recruitment initiatives etcetera.

So a lot of work in the background going on for the next few months with the goal of course of having the Phase III trial start in second half of the year. And last, going on as Kevin mentioned, we are pulling together all our pre-clinical data juvenile toxicology studies and other work with the goal of meeting with the FDA, so that at some point in mid-year either in late summer or later in Q3, we will be able to open the separate and unique IND specifically for Tourette’s syndrome, which would then enable us to begin a Phase II trials in target population that is the pediatric population with Tourette’s syndrome.

So that work is going on in parallel to the tardive dyskinesia work. And the group is busy, and as Kevin mentioned, we – or as I think as Tim mentioned, we are in the process of recruiting a few additional people to help us execute these plans in a timely fashion.

So very excited high energy environment right now around the VMAT2 program, and we’re looking forward to keeping you updated as things move along with the FDA. I think I’ll probably stop there and turn it back to, Kevin, and I look forward to any questions.

Kevin Gorman

Okay, great. So right now why don’t we turn it over to questions from all of you?

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Robyn Karnauskas with Deutsche Bank. Please go ahead.

Alicia [ph] – Deutsche Bank

Great, thanks. This is Alicia [ph] in for Robyn. First of all, congrats on the all the VMAT success during the quarter. It’s awesome. So sort of three questions. One, just curious about your plans for communication of any further data on Kinect 1. What’s the latest kind of on the elagolix timing from AbbVie? And then I just wanted to check one thing. You said no revenues in 2014. Does that include that you will get no milestone – you expect no milestones on the elagolix in 2014 to reach the modeling some in 2015 associated with the Phase III? Thanks.

Tim Coughlin

So Alicia [ph], this is Tim. We’ll start with the last question first. And that is true, we expect milestones in’ 15, I wouldn’t model anything in ‘14.

Kevin Gorman

And this is Kevin. As far as the question on AbbVie, there has been – guidance has remained the same, both for the endometriosis program and the uterine fibroids program. Recently AbbVie said from the podium that the first End-of-Trial is going to be reading out in second half of this year.

Alicia [ph] – Deutsche Bank

Okay.

Chris O’Brien

And with respect to the…

Kevin Gorman

I think that’s for Kinect 1.

Chris O’Brien

Yes, Kinect 1 data. So thanks. We are continuing to do some additional analysis with the Kinect 1 data and I have submitted some abstracts and things to International Congress of Movement Disorders. If we have in a timely fashion some additional data for that meeting, that would be great. It is not a critical path element to our program going forward.

We would use some additional data to help with our PK, PD modeling, but we don’t see that as a material event, and I don’t think you’ll see any public release. I think ultimately when we have these manuscripts that get out as journal articles, and that’s such a long timeline, but ultimately that should be all in that context.

Alicia [ph] – Deutsche Bank

So when does the Congress of Movement Disorder?

Chris O’Brien

There is this meeting by the Movement Disorder Society in June in Stockholm, Sweden in June 8 to 12.

Alicia [ph] – Deutsche Bank

Great, awesome. Thanks guys, congrats.

Kevin Gorman

Thank you.

Operator

Thank you. We’ll go next to Phil Nadeau with Cowen & Company. Please go ahead.

Phil Nadeau – Cowen & Company

Good afternoon. Thanks for taking my questions. In the prepared remarks, you mentioned that you have nailed down the patient population to move the VMAT into Phase III. I think the last time we talked, you hadn’t yet done subgroup analysis to look how the female have performed in the different underlying etiologies, that had caused the diseases that were then treated to give rise to tetrabenazine. Have you done that analysis? How did tetrabenazine performed in different underlying diseases?

Chris O’Brien

So firstly we’re not studying tetrabenazine.

Phil Nadeau – Cowen & Company

I mean – sorry, not tetrabenazine, the VMAT.

Chris O’Brien

So yes, Phil, thank you for that. We have done some analysis we discussed. And indeed when you look at the patient – the 60% of the subjects in Kinect 2, who had underlying schizophrenia or schizoaffective disorder, they had a statistically significant and robust separation of active from placebo on the AIMS scale and on the CGI done by the investigator psychiatrist.

Likewise, the 40% of the subjects who had mood disorder including bipolar disorder, they had a statistically significant and robust separation of active from placebo and the AIMS, the CGI, and interestingly also the PGIC. And so what this is telling us, that’s an exploratory measure, the Patient Global Impression of Change, that tells us the bipolar and mood disorder patients seem to have relatively good insight into their condition and clearly distinguish between active and placebo with respect to PGIC, whereas the schizophrenia or schizoaffective disorder subpopulation in Kinect 2 looks very much like the subpopulation in the Kinect study – well, not subpopulation – in the Kinect 1 study, they were all schizophrenia, schizoaffective and they all generally felt better.

They were not as good as discriminating active from placebo. And that’s exactly what the literature tells us that schizophrenia patients tend to – with tardive dyskinesia tend to have limited insight into their dyskinesia, whereas what we’ve seen now and I don’t think anybody has ever published before is that the bipolar subjects seem to distinguish that quite clearly.

So very nice statistical and clinically significant separation of the subgroups on the AIMS and the CGI and that’s interesting observation on the exploratory endpoint.

Phil Nadeau – Cowen & Company

So is it fair to say that the effect of the VMAT was the same in both groups? The only thing that was different was the ability of the patients to appreciate their disorder was greater in the mood patients than the schizoaffective patients?

Chris O’Brien

I would say yes, with two tweaks on that. One is that the schizophrenia and schizoaffective disorder patients, they felt better. And so they did feel that they had improved, but they didn’t separate as much the placebo group felt better also, whereas the bipolar group clearly if they were on placebo, they did not feel better.

Now the other point to just make is that numerically the mood disorder patients actually had numerically felt a greater improvement than the schizophrenia patients, but statistically they were both highly statistically significantly different. And the numbers start getting small. So I am not reading too much into that, but there was an interesting, at least observation.

Phil Nadeau – Cowen & Company

Okay. So for Phase III will you include those mood disorder patients?

Chris O’Brien

Yes.

Phil Nadeau – Cowen & Company

Yes. Okay. And then my second question is actually a follow-up to the last one on AbbVie timelines. Have they disclosed what their data disclosure strategy is going to be for the uterine fibroids data, the Phase IIb uterine fibroids there?

Kevin Gorman

No, they haven’t told us how they would be disclosing that data.

Phil Nadeau – Cowen & Company

Okay. Do you – and you may have just answered the same question, but we never saw the Phase IIb data. Do you expect them to release the Phase IIb data at all, or is it possible that they just can run into Phase III without releasing the Phase IIb data?

Kevin Gorman

That would be a good question for them actually. Phase IIa data, I wouldn’t expect to see that data anytime sooner or maybe ever. So that was just some exploratory Phase IIa study. The Phase IIb data, they do have a Publication Planning Group, that’s going – that takes all the data that’s being generated there at AbbVie, but we’re not preview [ph] to their timelines for when they will be publishing these clinical trials.

Phil Nadeau – Cowen & Company

Okay. And then my last question is that, there has been a good amount of discussion of deuterated tetrabenazine that’s in development initially for Huntington’s disease but there is also some expectation that’s going to move into tardive dyskinesia. I was wondering if you’d care to compare and contrast your VMAT inhibitor with the deuterated tetrabenazine.

Kevin Gorman

Yes, I think that it would be premature for us to be talking about their compound outside of Huntington’s chorea, which is where most of their work has been focused in doing a 505(b)(2) on that. I would say though that our compound has a number of advantages over tetrabenazine, so were they deuterated or undeuterated. So why don’t we wait for their programs to mature if they do, and then we can talk about it in the future.

Phil Nadeau – Cowen & Company

Fair enough. Thanks for taking my questions.

Operator

Thank you. We’ll go next to Ian Somaiya with Nomura Securities. Please go ahead.

Ian Somaiya – Nomura Securities

Thank you. And let me add the congratulations. It’s been great start to the year.

Kevin Gorman

Thank you.

Ian Somaiya – Nomura Securities

I wanted to ask you about the Phase III trial design. Is it planned to do one study with both patient populations at this point or do – need to do multiple trials? And maybe you can just speak to the duration of treatment [indiscernible] required in the studies?

Chris O’Brien

Thanks Ion. So while my fantasy is that I can do one pivotal and one safety study, the reality is that we’ll probably end up with two relatively modest sized 12-week pivotal trials, and then we’ll have open label extension through those. And in parallel, we’ll probably have an additional modestly sized open label safety trial for 12 months.

So two pivotals, 150 to 200 subjects each, 12 weeks in duration, placebo controlled and then one open label, just a simple safety trial for 12 months. So that at the end, we will have an NDA with a safety database of close to 1,000 subjects and we’ll exceed the ICH requirements for having more than 100 subjects with 12 months of continuous treatment.

Ian Somaiya – Nomura Securities

And what are the regulatory requirements in Europe?

Chris O’Brien

So we have not engaged the EMA in discussions of drug development and registration for tardive dyskinesia in Europe. That is not something that’s part of our current plan. That is something that potentially an ex U.S. partner would take on and we will leave that discussion with the EMA up to them.

Ian Somaiya – Nomura Securities

Okay. And just one last question on the Tourette’s program. You mentioned moving into a Phase II study this year. Can you just speak a little bit more specific on the timing of that Phase II trial and would it support moving into Phase III trial next year, or would you need to run other trials?

Chris O’Brien

Fair enough. So nobody has ever done any drug development for a pediatric Tourette’s syndrome with a VMAT2 inhibitor ever before. And I mean there are small open label kinds of things that have been by individual physicians, but for our purposes with our compound, we would open the IND as I say some time kind of Q3-ish. And sometime in the fall, we would look to start a Phase II, probably Phase IIa dose response type study, where you’d have the rough draft that I am working on now is it’s a multiple ascending dose, two weeks treatment at a time at each dose in the target population.

And the goal here is to have a study that’s not powered to show efficacy. It’s not a true hypothesis testing trial. It’s a dose ranging study to look for the first time at what the doses are, that might be appropriate in kids down to as young as six years of age. And it’s that data that we’ve reduced to go into, what I would – a plan on being a single Phase IIb trial prior to going into Phase III.

Ian Somaiya – Nomura Securities

Okay. And just, Kevin one for you, just from a business development standpoint. When do you, I guess, engage the sort of on the partnership front in earnest. I am sure you’re getting a lot of calls, but to see the Tourette’s data before signing a deal?

Kevin Gorman

So Ian, we have had a number of calls and we have a number of conversations ongoing now with a wide variety of partners, all centered around ex U.S. And so we are not in a hurry to complete a partnership here.

As I’ve said before, we want to get our Phase III program kicked off and have that moving along before we turn our attention to then doing technology transfer with the partners and being able to work with them to get the programs kicked off in their territory.

So my guidance to you is to not expect the deal this year out of us in this. There is not – it’s not a priority for us to do a partnership and it actually would do a disservice for our efforts both in tardive dyskinesia and in Tourette’s this year if we were to do a partnership.

Ian Somaiya – Nomura Securities

Okay. Thank you so much.

Operator

Thank you. We’ll go next to Thomas Wei with Jefferies. Please go ahead.

Thomas Wei – Jefferies & Co

Thanks. So I had a couple of questions just on, first, the reanalysis of the Kinect 1 data using the changes that you made to the AIMS endpoint in Kinect 2. Can you just remind us what the timing of that reanalysis is, and how we should set our expectations around that? Do you think it’s reasonable for us to expect the 50 milligram dose to actually become statistically significant now at week six?

Chris O’Brien

Thanks, Thomas. So a couple of points. You may be aware – and forgive me if I – my recall is not precise and it’s after we saw the initial Kinect 1 results, the top line week six results, we did have the opportunity to go back and do a blinded central raters video scoring of the Kinect 1 data at week six. And we haven’t obviously published that or talked about it in the kind of widespread way, but internally we saw a very nice separation of 50 milligrams from placebo at weeks six p-value of less than 0.05 using the same, just a simple comparison of all those subjects on 50 milligrams who had a week six AIMS score available compared to the placebo subjects at week six with an AIMS score. And that separation was very nice.

Now, that was done with a single rater doing a sequential scoring. That is the baseline scores of all the subjects’ videos and then the week six scores of all the subject videos. What I think you’re referring to is if we take the methodology that was applied to the Kinect 2 study, after our Scientific Advisory Board had put. We will rescore Kinect 1 looking at randomized sequence that is the baseline at week six videos will be mixed up in a random fashion and identify, and we will use two movement disorder neurologists who will generate a consensus score for all the body regions.

And those results we will incorporate into our PK, PD modeling which we will take to our FDA End-of-Phase II meeting.

So as I mentioned earlier, I expect to have those later this spring. I don’t anticipate it being material or gate keeping, but we will use that information – if it’s an internal dataset if you will, ultimately I expect that data will be part of whatever manuscripts we’ve prepared for journal submissions and it may even make it in time for the MDS meetings in June, but we’ll see how the timing works out.

For me it’s not – it’s an ad hoc, post hoc, post hoc. I don’t want to over sound on this.

Thomas Wei – Jefferies & Co

And then a question on the Phase III trials. Presumably this 12-month safety study that you’re running is not placebo controlled?

Chris O’Brien

Correct.

Thomas Wei – Jefferies & Co

And if so, how do you end up addressing the inevitable Agency questions that are going to emerge around depression and suicidality?

Chris O’Brien

So that’s fair enough. So we will have that discussion at the End-of-Phase II meeting. So what I tell you now is based on what I think. And obviously what the FDA thinks it’s important and so the End-of-Phase II meeting, we’ll seek concurrence on the Phase III plan. Having said that for most drugs in development for psychiatric and neurologic disease, for chronic use, when 12 week studies are the norm in the placebo controlled context, and then you have often the open label extension or safety type trials out to longer periods of time such as 12 months.

And you take the totality of the data. And the FDA makes their interpretation based on the totality of the data, and that’s pretty much the standard.

Thomas Wei – Jefferies & Co

I guess the question is more of – without an actual control arm, if you have patients who end up having suicidal ideation, I assume that you are going to use the standard metrics, the Columbia Scale or [indiscernible].

Chris O’Brien

Sure, yes, so we...

Thomas Wei – Jefferies & Co

But how do you leave in judge what is an acceptable rate or not an acceptable rate. Is it all based off of the patient prior – their baseline scores and you have to fall within a certain range?

Chris O’Brien

So it’s generally not held to a statistical standard of something that you have to pre-specify and meet. The Agency generally considers that a review matter, which is basically them telling you, I am making a benefit risk determination based on the totality of the data. And into that assessment, they include several things. So for example, there is a historical dataset about the prevalence and incidence of suicidal ideation and depression in patients with schizophrenia and bipolar disorders. So there is literature about that, we know what that is.

Secondly, we know for the subjects that enroll in our trials what the background rate of suicidal ideation and depression is. So for example in Kinect 2, more than 40% of the subjects, if I remember, a number of them precisely have a history of suicidal ideation even before coming into the trial. And we don’t see a signal that changes during our study.

And so the Agency will obviously look at that very closely and evaluate it in that context. And then of course we do have the placebo controlled trial. If we have two Phase III studies, 12-weeks in duration with few hundred subjects, you will be able to look at different frequencies of suicidal ideation and depression of two groups and make an assessment. So that’s what the Agency has to go on.

Thomas Wei – Jefferies & Co

Great, thanks.

Operator

Thank you. We’ll go next to Charles Duncan with Piper Jaffray. Please go ahead.

Charles Duncan – Piper Jaffray

Thanks guys for taking my questions, and congratulations on the recent data. So most of my questions has been asked, but I am wondering if you could – I am not sure if I missed this, the timing of the Phase III, you talked about in the start. And then thank you very much for the sizing of it or general sizing. Would you anticipate that to wrap up by the end of 2015?

Kevin Gorman

So in general for these three month trials with a few hundred patients, we are looking at about an 18 month process. I say about because no one has ever recruited this many tardive dyskinesia patients for a registration trial. So I can’t give you any kind of precision on that estimate. What we have said publicly in our documents is that we anticipate NDA filing in 2016. So that’s the working foundation from where we stand today, and obviously as we move along we’ll get greater precision.

Charles Duncan – Piper Jaffray

And then what are your plans around communicating kind of the results of the End-of-Phase II. I imagine you’ll wait till your End-of-Phase III meeting with FDA. I imagine you’ll wait to get the minutes, but will you come out and help us understand what the final protocol design is?

Chris O’Brien

Well absolutely, you are correct, often times the FDA tends to include little nuggets in their official minutes 30 days later. And it’s not at all as exactly 30 days. So in general companies are reluctant to speak out before they have something official in hand. The surest information you have of course is when we post the Phase III trial design information on clinicaltrials.gov. And that’s done before any patient is actually randomized. So you’ll see that at the beginning of the study as the worst case scenario.

Charles Duncan – Piper Jaffray

Then regarding the Tourette’s syndrome program, again I am not sure if I missed it, but you mentioned moving into clinical studies at the end of the year. Are there any experiments that you’re doing, if you will, in the pre-clinical setting? Are they more [indiscernible] type things, whereby you need to just complete the work? Are there any key questions or hurdles to moving in the clinical?

Chris O’Brien

The main one that stands between us and opening an IND for Tourette’s syndrome is completing the pre-clinical juvenile toxicology project. So the in-life phase of that is done, but the post study work done by the outside toxicology contract research organization and that takes months.

And so getting those final reports reviewed, audited, signed off and then the package assembled and then the meeting request for the FDA for a pre-IND meeting, that’s what’s going on right now. And then once that’s done, then we get the IND package assembled and submitted, as I said sometime Q3-ish depending on the timing of the FDA. And we would start that Phase II study in the fall.

Charles Duncan – Piper Jaffray

And then my last question perhaps for Kevin, regarding commercial plans in the States. I heard from an earlier question that ex U.S. partnering could occur after you kicked off the Phase III, but U.S. plans would be to move forward and perhaps commercialize product to yourself?

Kevin Gorman

Yes, our plans are to commercialize this product in the United States in both, tardive dyskinesia and Tourette’s syndrome. It’s very focused prescriber base. The size of the markets are ideal for a company of mid-sized – small growing to mid-sized biotech company, such as ourself. And we’ve built the sales force before. We can do it again. We’ve reclaimed all of that institutional knowledge in-house.

So we will slowly and gradually build up our commercial organization in here as the program moves forward.

Charles Duncan – Piper Jaffray

It makes sense to me in kind of what I thought your plan was, but I just want to check that, to make sure it hadn’t changed. Thanks for taking the questions.

Kevin Gorman

Thanks, Charles.

Chris O’Brien

Thanks, Charles.

Operator

Thank you. (Operator Instructions) Our next question comes from Marko Kozul with Leerink Partners. Please go ahead.

Marko Kozul – Leerink Partners

Hi, guys. Congrats on your progress this year. I just have a super quick one maybe for Chris. For elagolix in uterine fibroids, can you comment or share maybe your thoughts for the ongoing Phase IIb trials potentially serving as one of two pivotal registration trials? Certainly when we look at the study, it looks like it’s sized for the lower end of the range in terms of a potential pivotal for that indication? Thanks.

Chris O’Brien

Thanks, Marko Kozul. It’s an interesting and speculative kind of question that in general that would be unlikely, but when you’re dealing with a common non-life threatening condition, generally the Agency is pretty firm on having two well-controlled pivotal trials that are informed by a Phase II trial, but having said that elagolix having been used in so many women with endometriosis, there is a very large safety database and that would be the kind of the discussion that AbbVie would have to have with the Agency.

And that wouldn’t happen in – I don’t think until they had an End-of-Phase II meeting when they had all the data from both cohorts of the uterine fibroid study in hand. It would depend on the magnitude of the data, how closely the FDA thought that that protocol would mimic what they would require in Phase 3 etcetera.

Marko Kozul – Leerink Partners

Terrific. Thanks for taking the question.

Operator

Thank you. We’ll go next to David Friedman with Morgan Stanley. Please go ahead.

Yigal Nochomovitz – Morgan Stanley

Hi, good afternoon. This is Richard Horowitz [ph] standing in for David. Thanks for taking the question. Two more on the uterine fibroids program. The first is regarding the Phase IIb ongoing. Could you provide some additional perspectives on the secondary endpoints which you feel are the most relevant in your assessment, by my count account about 20 secondaries. And then secondly, in regards to timing for the Phase III, could you potentially comment on that? Thank you.

Chris O’Brien

Thanks. So for the second question, I can’t comment on the timing of the Phase 3 other than it depends on getting the Phase IIbs done and the Phase II meeting. What AbbVie has said publicly is that they were talking about 2015 as the timing for End-of-Phase III start, but again I have no unique insight. You would have to ask AbbVie on that.

Now as far as the secondary endpoints, you are exactly correct that there is a long list of exploratory secondary endpoints, very appropriate for our Phase II study as you are trying to determine, what are the things that you are going to want to make key secondary endpoints for inclusion into the label of a commercial product.

And so AbbVie and people at AbbVie who were previously at TAP Pharmaceuticals, they were the ones – pioneers who worked out what are the appropriate endpoints for uterine fibroid drug registration trial. And clearly for the U.S. uterine bleeding is the primary endpoint either measured through a semi-objective measure like alkaline hematin or one of the other measures that pictorial representation of blood loss.

From a secondary point of view, I think the ones that rise to the top would be pain and quality of life measures. You can see they are also looking at things like uterine size and fibroid size. I don’t think those have very much bang for the buck in terms of FDA. Those are interesting things, but if you are asking my opinion, I would say they tend to fall a little bit lower down the list.

It’s all about blood loss and pain and quality of life. They are also obviously investing a lot of work into looking at things like productivity, the health and economic kinds of things that will ultimately be very useful when interacting with the payors.

Yigal Nochomovitz – Morgan Stanley

Thank you very much.

Operator

Thank you. We’ll go next to Robert Hazlett with ROTH Capital. Please go ahead.

Robert Hazlett – ROTH Capital

Thanks. So a lot of ground has been covered in Q&A. Most of my stuff has been covered up. I just want to ask a strategic question. I guess if you see success with elagolix, does that potentially get you to act more aggressively in any way shear perform with the VMAT2 program either with Tourette’s or with TD or does it cause you to think more broadly about VMAT2, where the VMAT2 program in its development in terms of potentially considering Europe for yourself or other broader indications down the road, just a little color strategically in terms of what elagolix success might mean for the other programs?

Kevin Gorman

Yes. It’s a good question. Elagolix success obviously this year would be transformational for this company, but on the aspect of how it will directly affect what we’re doing in VMAT, we are putting 100% of the resources that we have or that we could envision right now into tardive dyskinesia and Tourette’s syndrome. If there is anything more that we could be doing with our VMAT2 inhibitor at this point, we would be doing it. Access to capital is not a question, we just – right now, we are putting all of our capital towards TD and TS right now.

We have a very even active backup program within the VMAT2 program that we don’t talk about, but we have numbers of other molecules and a lot of research going on in order to fully understand this system. I think only the very surface of the VMAT2 system has been scratched biologically at this point in time. There is a lot of understanding that we’re developing here. And there could be a wealth of other things to do within the VMAT2 system, both with the compound that we currently have in late-stage development and potentially with backup compounds that we have moving along.

I think that what success with elagolix eventually which we’re highly confident of is going to allow us to move other programs that we haven’t currently talked about even more aggressively.

Robert Hazlett – ROTH Capital

And the assumption is that those would be again more in the VMAT2 related areas and CNS-related indications?

Kevin Gorman

The other programs that we haven’t talked about are on neuro endocrinology focus as is – which is the focus of the company.

Chris O’Brien

Either neuro or endocrinology.

Kevin Gorman

Either neuro or endocrinology.

Chris O’Brien

Yes.

Robert Hazlett – ROTH Capital

Thanks. We’re hoping for a success on a lot of levels, so we can see those. Thanks.

Kevin Gorman

Yes. Okay.

Operator

Thank you. We’ll go next to Jon LeCroy with MKM Partners. Please go ahead.

Jon LeCroy – MKM Partners

Thanks. Just a couple of quick follow-ups on elagolix. So the timing for the first elagolix Phase III what month are you expecting that to fully wrap up so we can...

Kevin Gorman

I can only go by clinicaltrials.gov that AbbVie has there, Jon. And it says the final data collection is in September of.

Chris O’Brien

August.

Kevin Gorman

August, I am sorry – of August of this year. And it’s going to be completely up to AbbVie then how quickly they then disseminate that data, when that wraps up.

Jon LeCroy – MKM Partners

And you are assuming they are going to disseminate that and not wait for all of the trials together?

Kevin Gorman

My assumption is that they will disseminate that and that is based on the fact of how they’ve disseminated their Phase III data with the Hep C program, where they’ve had numerous Phase III trials and they’ve reported each one out as it’s come – as the data has become available.

Jon LeCroy – MKM Partners

Okay. And then as far as your milestones on Phase III data, what needs to be completed for those?

Kevin Gorman

Our milestones are not based on completion of activities, they are based on the initiation of activities. So we’ve already been paid our milestones for the initiation of Phase III in endometriosis. So our milestone stream will pick up again. We anticipate to pick up again in 2015, but we’re precluded in talking in specifics what those events will be.

Jon LeCroy – MKM Partners

Okay. And then is the uterine fibroid Phase III start moving into ‘15, a slip relatively to what you were thinking a few months ago?

Kevin Gorman

No. That’s what we had anticipated a few months ago.

Jon LeCroy – MKM Partners

Okay, thanks. That’s it.

Kevin Gorman

Thank you, Jon.

Operator

Thank you. It appears we have no further questions at this time. I’ll turn it back to Mr. Gorman.

Kevin Gorman

Well, thank you very much everyone. And like I think Chris outlined to you, the last several weeks and the next few months here going into Q2, there is going to be a lot of work that we’re laying the foundation that is going to be coming to fruition in the second half of this year in all of our programs that we have. And I hope to be talking to you about additional programs in the not too distant future that we have going.

At our next earnings call, you can anticipate that we’ll probably be talking about the results of our End-of-Phase II meeting at that point in time. So we’ll have a little bit in our next...

Chris O’Brien

No. We have a Q2 end meeting, so that our earnings call would be at...

Kevin Gorman

Earnings call will be in Q3.

Chris O’Brien

Yes.

Kevin Gorman

Yes. So it will be – we’ll have some more color for you on the End-of-Phase II meeting on our next earnings call. So thank you very much and I look forward to talking to you in our non-deal road shows and also at the conferences coming up. Take care.

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