Neurocrine Biosciences, Inc. (NASDAQ:NBIX)
Q2 2010 Earnings Call
July 29, 2010 8:30 a.m. ET
Kevin Gorman - President & CEO
Jane Sorenson - IR
Tim Coughlin - VP & CFO
Chris O'Brien - CMO
Phil Nadeau - Cowen
Thomas Wei - Jefferies & Company
Ryan Tochihara - Oppenheimer
Good day everyone, and welcome to today's program. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. (Operator Instructions) It's now my pleasure to turn the conference over to Kevin Gorman.
Thank you very much, and thank you everyone for joining us this morning. I'm joined here with Tim Coughlin, our CFO, Chris O'Brien, our Chief Medical Officer, and Jane Sorenson. Before we get started, I'd like Jane Sorenson, to read our 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, 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?
Thank you, Jane. So this morning we will start out with Tim taking you through our second quarter results and the half yearly results and then importantly he will update our guidance for 2010. Chris will then briefly take you through the where we are with each of our programs and with our partnerships that we kicked off, and then we will open this up to any questions, so to start out with Tim.
Thanks Kevin and good morning everyone. We released our financial results yesterday after market closed, and it was a very good quarter. And the big financial events for the quarter were the Abbott and Boehringer Ingelheim deals we signed in mid-June. As a result of these two deals, our financial position is dramatically improved, and we have provided new financial guidance for the balance of 2010 in our earnings release.
During this portion of the call, I'm trying to cover the quarterly year-to-date financial results, go over the highlights of the two new collaboration agreements and provide detailed guidance for the balance of 2010. As always, we will entertain any questions during the Q&A portion of the call.
Our financial results in those important metric is a cash burn from ongoing operations. If one were to exclude the impact to these two recent partnerships, we again met our targeted burn from operations of $11 million for the second quarter. Our net loss for the second quarter was $5.2 million or $0.09 per share. This compares a net loss of 15.3 million or $0.39 per share for the second quarter of last year.
Our year-to-date loss is 13.8 million, or $0.27 per share, compared with 2009 year-to-date loss of $34.9 million or $0.90 per share. The reduction and the net loss is primarily due to the restructuring program that we implemented in the second quarter of last year to conserve cash coupled with ongoing cost control measures across all functions within our company.
Research and Development cost as well as general and administrative costs were in line with our expectations for the quarter and the year-to-date and significantly lower than last year. This is primarily due to the lower personnel related cost and across the Board reductions in non-clinical related expenses. We entered the quarter with cash and investments totaling $134 million, a significant increase resulting from our up-front collaboration fees.
Additionally on July 1, $9 million worth of our auction rate securities were redeemed at par. We now have one auction rate security left with the par value of approximately $3 million. As previously mentioned, we signed two significant strategic collaborations in mid-June, one with the Abbot for GnRH program and one with Boehringer Ingelheim for GPR119 program for diabetes.
Both of these collaboration share similar financial structure consisting of upfront payments, milestones and royalties in future sales. The Abbot collaboration for GnRH and Elagolix provided us $75 million up-front payment and allows for milestones of approximately $530 million, and up till approximately 24 million in personnel funding through December 2012.
Additionally all external development, marketing and commercialization cost related to GnRH are paid for by Abbot. Second collaboration grew with BI for GPR119 consists of $10 million up-front. Potential milestones are approximately $225 million in research funding.
All external development, marketing and commercialization cost are borne by Boehringer Ingelheim. For 2010, we initially guided that our operations burn would be up to 45 million exclusive of any partnering agreements. Our burn from operations for the first half of the year again excluding the financial impact of the partnerships of 23 million as planned, 12 million in the first quarter, 11 million in the second quarter.
Our operations burn for the second half for the year will drop to approximately 7 million per quarter. The decrease in our burn is directly attributable to both agreements more specifically the previously mentioned external cost funding, and the funding of certain internal cost will mitigate our burn from operations.
We expect revenue for the second half at 2010 to be approximate $27 million consisting of the amortization of the up-front payments. FTE support and reimbursement of external development expenses. Expenses will be within our guidance given at the beginning of the year of 43 to $46 million in total expenses, and G&A expense should remain relatively stable as it has in the first two quarters.
For yearend, we expect to have an annual loss range from 8 to $11 million, and then the year with 130 million in cash investments in receivables from collaboration partners. One other item is not included as a component of our financial forecast, but could help the bottom line and more importantly be accretive to our cash positive as the IRS 48D applications we filed early last week.
Under recently in active healthcare bill, the new $1 billion federal program was created subsidized certain cost paid or incurred in calendar 2009 and 2010, directly related to the conduct of a qualifying therapeutic discovery project. This subsidy is available offset 50% of eligible project cost in the form of a cash grant or non-refundable investment tax credit up to $5 million for companies with up to 250 employees.
We have filed for cash grants related to several of our programs under the Section of the Internal Revenue Code. The final word to termination is schedule to be made at the end of October, at which point we will find out the amount of grant money if any we had received. Any balances received would be additive to the previously mentioned numbers. For those looking for more details around the financial results, we plan to follow 10-Q with the SEC later today.
And in closing, I would like to stress why we are now stronger financially. We will not move away from our physical discipline has enabled us to arrive at this position. Controlling our burn and making wise investments will remain a top priority of this management team. Thank you for your attention and with that I'll turn it back over to Kevin.
Thank you, Tim. So as you can see we are in the fundamentally different position than we were just a month ago. The revised guidance I think speaks for the magnitude of these fields and they can now start to be fully appreciated.
I'd also like to take a moment just to congratulate Tim and his team for their strategy in dealing with the option rate securities over the last two years. We're bringing those in at close to par value when you look at this throughout the entire portfolio and that's just outstanding considering what the markets have been through over 2, 2.5 years.
At this point, I'd like to turn it over to Chris, give us an update and then we can take questions.
Thanks Kevin. I'll touch on each on the programs for an update. The GnRH program obviously is the biggest focus of our activities, particularly in this past couple of weeks. Once we're able to finalize the agreement with Abbott, the real hard work began where the two teams started their process of integrating our current activities, the transition of our ongoing studies, manufacturing and preclinical work, and getting very large, very enthusiastic Abbot Team up to speed.
As you can well imagine during the intense diligence process prior to signing the agreement, a small core team of Abbot personnel were involved with learning about Elagolix and other generates a backup molecule the -- that small core team has been significantly expanded to involve the full infrastructure that comes to bear on this program.
So, the Abbot team for manufacturing preclinical clinical development regulatory affairs, quality assurance and of course now commercial sales marketing has now gotten involved. So, we sent a large team from Neurocrine up to Chicago last week for our take off meeting in which all the functional areas began meeting face-to-face, and we began the rather massive task of transferring the IMD all the regulatory control documents and the archive full information over to our colleagues in Chicago.
It was a great take off meeting. We have a really good partner on this, and I couldn't be more pleased with both the strategic and the tactical activities that are currently underway. So, one of the fun things for us as a small biotech is in addition to obviously having a partnership and a deal is now we get access to tremendous resources. We know that Elagolix and the follow-on molecules are in good hands, and we have a team at Abbot that brings to bear things that we couldn't do.
So, for example getting involved with health outcomes, health economic outcomes, these are things that will position the whole women's health, women's health field in a way that we were able to do because we don't have those resources. A commitment uterine fibroids as a developmental program for a second indication for Elagolix is tremendous. We wanted this all long. We didn't have the resources, now this can start happening, and obviously there is a large commitment on Abbot's part to begin all the work that's needed for manufacturing of the commercial supply for the launch of Elagolix for endometriosis.
We begun work on all the planning that goes into plates for the Phase III trials for Elagolix endometriosis as you can imagine with several 1000 patients that constitute the NDA file that we plan to submit for endometriosis you have 100s of investigator sites that need to be qualified or re-qualified, whole process of gearing up for the Phase III is now begin put into place. So, a very exciting and we are really happy with Abbot as our partner.
In the meantime, we have our transition activities finishing up the things that Neurocrine has been running all along as you know the Daisy PETAL Study or so called 0901 Study is winding down. We have approximately 12 women I think left on the open label portion of that six months trial and that last patient last visit occurs in September and then the wind down of that trial will occur through the rest of the fall.
We have ongoing work as the preclinical group here at Neurocrine is continuing to supervise the two year carcinogenicity study in two species and that's going well and the manufacturing groups from the two companies are working together to gear up for adequate supply for the Phase III trial and ultimately commercialization.
So, very nice collaborative work, we are very happy with how that's going and we are in the process of getting a bit Neurocrine in place for end of Phase II meeting request that will go in this quarter and we will be as always Phase III ready by the end of the year looking forward to starting the Phase III trials early in 2011. So, moving on from Elagolix and GnRH program talking about Urocortin 2 as we have discussed before the infused peptide for Acute Decompensated Heart Failure is in the midst of a Phase II study.
This trial has been run at a single site, the Cardioendocrine Group in Christchurch, New Zealand and this trial scheduled to enroll 50 patients with Acute Decompensated Heart Failure is now more than half enrolled and as we have stated before we look forward to results from our New Zealand colleagues sometime in 2011.
The trial according the investigators is going well and no safety signals that will jeopardize the completion of the trial. In addition, we have a I think we've called it kind of a specialty or a kind of niche studies that we have on arrangement with academic collaborators for the University of Edinburgh in Scotland and these are very highly specialized small studies looking at attributes of your according to that may help us position us to be used optimally for cardiovascular disease.
These are very specialized infusion studies looking at the impact of Urocortin 2 on various aspects of arterial and venous function and cardiac function and dysfunction. So, these studies are slated to begin sometime this summer. They are in the midst of working with their institutional review boards in various aspects of getting that is highly specialized academic trials underway.
We are very happy with our VMAT2 program, as you know we started a repeated dose trial in Canada and that trial is currently underway that are Phase I unit up in Montreal and that very happy how that conduct of that trial is going. The weed of that will be probably sometime in the September timeframe at which point we will make a go no go decision about moving into patients with part of dyskinesia.
So, assuming positive results from the repeated dose of Phase I trial in healthy male volunteers in the September timeframe, we would then look forward to initiating Phase II trial in patients with tardive dyskinesia by end of year.
The CRF1 antagonist program, as you know, is being run by GlaxoSmithKline. GSK is in the process now of closing out the major depress disorder trial here in the United States. The last patient, last visit was as scheduled in June, and as soon as they finish the database lock and unblind that dataset they would share top line data with Neurocrine, and we anticipate sharing the results of that trial with the public once we have that available. And we anticipate having some results in the -- toward the end of Q3.
As we had mentioned before, and as is available at clinicaltrials.gov, you can see that 679 the molecule that GSK is testing in the major depressive disorder trial. It's also being assessed in several other studings. Most importantly, is a project being run through AMRI University and outside Mount Sinai Medical Center in conjunction with GSK to assess the impact of CRF1 antagonist in post-traumatic stress disorder.
And this is obviously, a complex trial, particularly as it relates to enrollment of subjects, and so this ongoing work is expected to read out in couple of year's time. We are very happy. We had a very nice meeting with our GSK colleagues and ongoing meetings over the next few months and obviously, we will keep you appraised as soon as we have top line results from the depression trial.
Tim and Kevin have both mentioned the GPR119, a program. This target is a very interesting target from a scientific point of view, and the Neurocrine team, now in collaboration with Boehringer Ingelheim have come up with some very noble approaches to targeting diabetes in this fashion.
And in fact, the Neurocrine team has been over in Germany working with BI this week for their take-off of this collaboration and they were very excited about this ongoing research effort to help patients with diabetes.
So a lot of work going on in that space. What we don't know when we talked about of course is the ongoing research and discovery activities that we have at any given time, five or six research, discovery programs going on internally. Those activities continue, and our goal is to be able to bring forward one or more of these programs into the clinic next year, to continue our development activities.
So, at that point, I'll turn it back to Kevin and I look forward to your questions during the Q&A, Kevin.
Thanks Chris. So, that gives you a pretty good update. We were just on the phone with you about a month ago. So, why don't we open up it up to questions right now?
(Operator Instructions). Our first question comes from Phil Nadeau with Cowen. Go ahead please.
Phil Nadeau - Cowen
Good morning, let me the first to congratulate you on a very productive quarter. First question is on something that you mentioned in the press release and that was that you're getting the info necessary to file in the end of Phase II meeting request with the FDA. I know you said that it is going to be in this quarter, but could you give us a little bit more details on what type information you need to put together to make that filing?
Thanks Phil, so it's not -- the process is what's going on right now. The information is available, what we are doing is converting what kind of Neurocrine standard operating procedures are for these kind of regulatory files in to the Abbott SOP's, if you will.
So you were mating up the small universe of Neurocrine to the big universe of Abbott and putting it in their -- into there process. So, that's happened, we had a -- as I mentioned a very nice kick off meeting last week. All the teams are aligned and it's just a matter of getting this very large freighter up to speed and pointing it in the right direction. So, the goal is to submit the end of Phase II meeting request this quarter and that's Abbott's purview.
Phil Nadeau - Cowen
Okay and on the extension from the Daisy PETAL study, can you remind us what is going to be new in that, is it just longer term safety or is it something else?
There are two things that we expect to get out of this, one is the safety data from six months of treatment with the scope of patients and to add to our knowledge of how the this molecules works and tolerability and safety and in endometriosis but also important, we have the -- this is the first time that we have used the modified wording of the co-primary end points and we reported obviously on the placebo control potion of this trial, now we want to see how these modified, descriptors perform in persistence of benefit out through six months, because that will be a critical part of obviously the long term development program.
So, I don't expect any surprises, in fact we hear from the investigators and the subjects that have been enrolled in the 901 study, that they are really quiet saddened to have to finish there six months of treatment.
We got a request from one of the sites for a case of tissues because the subjects were fearful that they had to end their enrolment. They want -- the love the drug and they want to continue in there is some kind of open label extension or compassion at use kind of programs, something long term so. It's really is that resistant so the fact and I don't expect any surprises.
Phil Nadeau - Cowen
Okay great that's very helpful and then Tim one last question for you. You gave some revenue guidance for the back half of the year and I guess I'm wondering two things; one is 27 million over six months, is that kind of what we should project into the future for the amortizations and reimbursements or is there anything special about this six month period? Then I was thinking if you can give us some idea what is reimbursements versus amortization or milestones that would be helpful too.
So, the ammonization is typically over the period that, the accounting rules call for the period that we participate -- actively participate in a collaborations so we were required to do something so, I think if you look across that 27 million and break it down, your essentially looking in the neighborhood, at 16 - 17 million of amortization, the rest is reimbursement of extra development expense or FTE reimbursements.
Phil Nadeau - Cowen
Okay, and did you use the period of the collaboration, the patent life of Elagolix or --
No, no, just the -- it's the portion of time that we're required to participate in the development. So typically under these agreements there is either a predefined research period or there is a period of time where we work in joint with Abbott and then at that point it becomes fully passed out and then run it from there.
Phil Nadeau - Cowen
Okay. Got it. Thank you.
Thank you. (Operators Instruction). Our next question comes from Thomas Wei with Jefferies & Company. Go ahead please.
Thomas Wei - Jefferies & Company
Thanks. Wanted to ask on the 901 study, you had mentioned on one of the prior calls that sometime in late June you would actually have some data from your -- its like consultants on a correlation between the daily and the monthly end points to validate some of these changes that you made to this scale. Do you have that information and how does that work?
Hi Thomas. Thank you. Yes, we have an upside consulting group that has helped us do a whole series of analysis on the modified wording co-primary endpoint and in fact, we're very pleased as is Abbot with the results from that. That's an integral part of the end of Phase II meeting package that will go into the FDA. We don't obviously share that at the present time in a public way but it is something that I think can be very important for the field of endometriosis research going forward and it's something that we look forward to publishing in peer reviewed journals...
Thomas Wei - Jefferies & Company
That puts you, I believe that the fact that you're still going forward with filing for an end of Phase II meeting, we should take that as a good sign that there has been nice correlation seen between the daily and the monthly scales.
Yes, absolutely and it's all about validation of the co-primary endpoints.
Thomas Wei - Jefferies & Company
Right and then I did want to ask a little bit about the whole strategy in terms of label and how your thoughts maybe have changed now with the Abbott collaboration, if at all on chronic versus short-term dosing on the final label. How should we think about that and the Phase III trials that you had originally proposed were definitely designed around chronic use of the drugs? Should we expect that chronic dosing label and if not why might that be?
Yeah, all good questions Thomas but as you imagine now being in a collaboration and talking about label is something that our partner would probably not want us to be getting into. But suffice it to say that we'll look and Abbot anticipates a very strong label to be associated with this drug and one that is going to help penetrate the entire endometriosis market. And the Phase III program that has been compiled is a very strong program that I think is going to meet the needs of not only the agency but also the patients.
Thomas Wei - Jefferies & Company
Okay, thank you.
Thank you. Our next question comes from Brian Abrahams with Oppenheimer. Go ahead please.
Ryan Tochihara - Oppenheimer
Hi guys. This is Ryan in for Brian today. Thanks for taking my question. I guess, could share your thoughts on about -- kind of your thoughts about pursuing the fibroids indication for Elagolix? And then my second question for the GRP partnership where the milestone payments that you could potentially receive from Boehringer. Are those mainly weighted towards development or are they more towards regularity and commercial achievement.
Ryan, I'll take the second question first and the milestone payments recall this is a very early research collaboration. So there is definitely a substantial amount of milestones are ones that we can affect by being involved in the research collaboration over two years. And then also there is milestones that extend beyond that if compounds continue through the entire development process or into commercialization and with royalties at the tail end.
And Chris can answer your first question.
So the uterine fibroids question is an important one and one of the key reasons why we're so happy with our collaboration with Abbott because they understand the uterine fibroid market, the understand the uterine fibroid regulatory pass and clinical development and so it's a priority of the collaboration that the uterine fibroid phase II trials get started as soon as possible. So the teams are actually as we speak already beginning the work necessary to get these up and running. We see this as a huge opportunity and a very natural fit with our goals.
Ryan Tochihara - Oppenheimer
Great, thanks so much.
Thank you. At this time there are no further questions in queue. I'd like to turn back to our speaker, Kevin Gorman for any closing remarks.
Thank you very much. I appreciate everyone's attention this morning. The two collaborations that we've done really do speak to what this company has been now designed to be able to do and what we perform on. the collaboration with BI illustrates that we have a unique and a very successful discovery engine and with our sound financial footing that we're on, we're going to be pushing this hard and continue to work on the multiple targets in bring more in that the group can work on.
And so we are pressing forward with these and as these come to fruition we'll be speaking more about them in the future. In addition, we've clearly shown that our clinical regulatory group can take a program all the way through a substantial phase II in a very large way and if necessary, with the resources, we can go farther with that and that's been appreciated by Abbott in the way that that collaboration is structured where there is a significant number of personnel within Neurocrine that are being funded now for several years in order to being this into an NDA filing.
And so that's what we're going to be using, that core group of people now to move forward our in-house programs very aggressively. But at the same time what -- I want to reiterate what Tim had said. We are going to stay as vigilant as ever on our cost containment. We understand what the amount of money that we have in the bank can do for us and we're going to be utilizing that to create shareholder value as we have done all along.
Right now our focus is exquisitely on bringing our partners up to speed and utilizing their significant resources, particularly Abbott's in moving Elagolix forward in both Endometriosis and in uterine fibroids; and then as I said, moving aggressively in our other programs, our in-house programs, particularly VMAT2 in moving that forward.
So that's how I'd like to end and I'd like to thank you all for your attention and I look forward to talking with you in the coming weeks and months. Take care.
This concludes today's conference. You may disconnect at any time. Thank you for joining us, and enjoy the rest of your day.
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