Neurocrine Biosciences' (NBIX) CEO Kevin Gorman Presents at Bank of America Merrill Lynch 2014 Health Care Conference (Transcript)

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 |  About: Neurocrine Biosciences, Inc. (NBIX)
by: SA Transcripts

Neurocrine Biosciences, Inc. (NASDAQ:NBIX)

Bank of America Merrill Lynch 2014 Health Care Conference Call

May 15, 2014 1:40 PM ET

Executives

Kevin Gorman – President and CEO

Analysts

Tazeen Ahmad – Bank of America/Merrill Lynch

Tazeen Ahmad – Bank of America/Merrill Lynch

Thanks for joining us. I am Tazeen Ahmad; I'm one of the Biotech Analysts at Bank of America/Merrill Lynch. I work on the Midcap team. It is my pleasure this morning to introduce our next presenting company, Neurocrine Biosciences and presenting this morning is Dr. Kevin Gorman, who is President and Chief Executive of the Company. He is one of the founders who has been with the company since 1993. He is here to talk about the exciting platform that company is developing not only for -- excuse me, for neurological disease but also with its partnership with AbbVie. So with no further due, I am introducing Dr. Gorman.

Kevin Gorman

Thank you very much and thank you to the BofA/Merrill Lynch for the opportunity to speak here today. I’ll show you our Safe Harbor statement; I will be making forward-looking statements. So, please go to our recent SEC filings for the risk factors.

A quick little discussion here on our elagolix. Here is a program that we partner with that AbbVie about 3 years ago. They have it in two large Phase III trials and the endometriosis, the first one, AbbVie is directing the readout later this year. And then they also have it in Phase 2/b uterine fibroids which they are directing will be reading out in early next year.

There is additional disease as one of the beauties of this program is that it is truly a pipeline with the program and AbbVie is being very diligent to have focusing on the two largest markets here with the program simultaneously. Fortunate part is that this program was completely developed and discovered within Neurocrine, so we have intellectual property that covers composition of matter the 2024 in patent term extension takes about the 2029.

So, AbbView has a quite a long patent life here in order to invest in this program. And these are patents that are issued not only in the United States but throughout the world and we've made tens of thousands of active small molecules around this one, so we've got a very good patent sense surround it and then all the methods are used to go along with that.

Well, I'm going to spend most of my time here talking about today is our wholly owned program that we plan on keeping for ourselves in commercializing in the United States. And that is a program for movement disorders, we call it the VMAT2 program because that's the target, it's an intracellular pre-synaptic -- target, Vesicular Monoamine Transporter 2.

And again you have the situation where you have multiple diseases that this can target all of them having to do with the movement disorders for psychiatric disease. The one that we are focusing on initially is tardive dyskinesia for those of you who aren't familiar TD. It is a disease that is by and large irreversible lifelong and is caused by taking antipsychotics.

So the physician in order to control a schizophrenics disease or a bipolar or a major depressed patients disease, prescribe the antipsychotic and ask for prolonged use on this, about 5% of the population -- with this lifelong irreversible movement disorder that can be quite disabling. The second disease that we are going to be going into this year is Tourette syndrome with this drug. And that is one where it occurs primarily in children and is also very debilitating to their emotional healthy, they are starting at six years old and by and large the disease goes away when patients are in their late teens to early 20s.

So, what I'd like to talk to you about here is that we’re about to go into our end of Phase II meeting with the FDA in tardive dyskinesia. And when we -- what we wanted to accomplish in Phase II with this drug was listed here. To identify our patent population, by that I mean there is -- it's tardive dyskinesia but this is caused by the antipsychotics, about a third of the patients with TDR schizophrenics and they are all in antipsychotic currently, while they would be taking our drug.

And then the second population, which is about two-thirds of the population are the bipolar in major depressed patients and they buy and large, once they've contracted TD, their psychiatrist is taking them off of their antipsychotic because there are other choices of drug. We needed to know whether our drug effectively treats both of these populations, that's the underlying disease having the impact on the efficacy safety or dosing that when needed. And then obviously like all Phase II programs, you need to determine dose.

And then we needed to develop a trial design that's scalable to Phase III. You don't want to put something in place in Phase II that you can't scale up the Phase III. And the final one here which we are going to talk about in a little bit of detail is the primary endpoint of the agency wants us to use and they've unwavered in that is a scale that’s been around 70s and it was always used as a safety scale never as an efficacy measure in an NDA-enabling program and that's the AIMS scale, the Abnormal Involuntary Movement Scale.

And this basically where the -- scale is. It's a -- physician rated that scale on the severity of their movements, there is seven body regions that go into it and the zero to four scale is put on each body region going from none, minimal, mild, moderate to severe. We're the first company ever to use this as a primary end point.

So we did four Phase II trials and I can say that we are highs and lows throughout that Phase II program and that's why I'd like to briefly take you through it. Two Phase IIa trials. Now the first one we designed was with a single investigator up in Canada an expert in treating tardive dyskinesia, an expert movement disorder specialists. And it was just a small trial, there were six Schizophrenic patients that we treated over 12 days, just an escalation of dose and what we got out of that trial was the drug was well tolerated and it appeared to be very active.

Now that all has to be taken -- this was an open label study by an expert and that's what open label study is by a single unblinded expert give you. We then went from that to another Phase IIa trial design.

We wanted to see here in a randomized placebo-controlled trial whether we have non-movement disorder experts basically psychiatrists and nurse practitioners at a side, can they reliably administer the same exam and it's about 12 minutes neurological structure, neurological exam that they do on the patient and we wanted see if a crossover design to a study where they are on drug for two weeks and then they are off drug for two weeks and you measure the delta in the AIMS score when they are on drug and off drug.

What we found in this was that when we unblinded this, the AIMS did not show any statistical significance and that was very much of a surprise to us, especially following the nice results we had in the first Phase IIa. One of the fortunate thing is that videotaped each and every patient visit when they were administered the AIMS. So what we did was a post-hoc analysis, we took and AIMS expert, actually a head of a company that trains physicians on how to use the AIMS. And we sent them around to all seven sites, they were completely blinded and they rated the videos sure enough when they did that and we put it into the pre-specified statistical analysis, it showed us a positive result.

So what did we learn from that Phase IIa. Well one of the things that we learned is that expert came back to us and said, you know, a lot of the patients that were in this study should never have qualified for the study. They were not tardive dyskinesia patients, they have another movement disorder or some of them that were TD were mild, they weren't moderate to severe.

And also they felt that there was a large placebo response that was going through here by the investigator, because the investigator was the treating physician. So we said okay, now we are going to go into our Phase IIb, we feel -- on this, we are going to increase the amount of training that we gave to the onsite raters on that AIMS, so that they are better able to do this. But we are also going to centrally rate the run in AIMS scores. So we take who enters the trial, the decision of who qualifies for the trial, out of the trial sites hands and it's completely up to an independent committee to say whether they have PD and whether it's moderate severe.

And in addition we required each site that there are two treating personnel, one is the physician who is there for the wellbeing of the patients and the second one is only seeing the patient to do the AIMS.

And so we embarked on two Phase IIb studies at that point in time. They were staggered by approximately six months in the start of these studies. The first Phase IIb was called the Kinect study; it was a randomized placebo-control study, 40 sites now. We have the onsite raters, but they are not the treating physician, they are just another -- again psychiatrists, there are the side runners, practitioners psychologists 120 patients, they are schizophrenics. And the result once again when we unblended here very surprising, the AIMS didn't show statistical significance.

Again, we took a blinded central rater, looked at the videos, post-talk analysis, we were very tired of doing post-talk analysis and showed statistical significance. The main learning we got here was several fold, we brought in our scientific advisory board which are movement disorder specialists. And they all agreed with us.

The primary end point has to be measured centrally by AIMS experts, movement disorder specialists. And the another thing that they suggested was what we do is in the next trial which was ongoing that second Phase IIb, which is a Kinect 2 study is that these two movements are sort of specialist need to be at the end of the study locked in a room given all the videos but they are all scrambled, so they triple blind it. Not only do they not know who is on placebo, nor will they know who is on drug, but they have no idea whether they are looking at a baseline visit or whether they are looking at a week-six visit after being treated.

So when we did that, we wrote a formal amendment to the FDA on the Kinect 2 study and that's how we rate out the Kinect 2 study and let me show you what that showed. Here highly successful study.

We showed a mean change from baseline, whether you are talking about the intent-to-treat per patient, highly statistically significant and clinically meaningful. We've got a responder rate that was 50% or 60% depending on the population that you use and for CNS drug that is better than what you could ever hope for here.

And the other thing that I would point your attention to is the placebo effect is vanishingly small. One of the things that the FDA looks for is when you look at a cumulative proportion of responders, this is a -- this is the type of curve that are in the Phase II meeting, the agency is going to pay special attention to. When you are looking at as you decide where you are going to make your cut off of what is a responder and what is not a responder. All the way through here it doesn't matter where you would do it. We don't cherry pick at all where it is. These lines are separated all the way through.

You never see them get close, you never see them crossover like you do in many diseases. So this is a very powerful support of evidence of the efficacy of the drug. In addition, there was a secondary key end point in the study. And this is actually done by the physician who is treating the patient at each site. So there are 40 different physicians here. And this is the clinical global and depression of change of tardive dyskinesia. This is just the physician at the end of week six rating are these patients very much improved or are they the same or are they very much worsened. And we only use very much improved, they are much improved here. And what you see is a very robust response.

These physicians, when not having to use the AIMS just overall sense of the patient, they see they as dramatically improved. What I might add is that we then applied the same methodology of two movement disorder specialists locked in a room, triple blinded to the Kinect 1 database. And they came up with nearly identical data to this one. A baseline of approximately 8 and the other one it was 8.1 and a placebo response of a minus 0.1 versus a minus 0.2. So what we were doing here, we showed in two Phase IIb studies -- one retrospectively was very reproducible.

What I would like to show you now is why we believe so strongly in this drug even before these results from this study. And what I'm going to show you here is going to be four patients very briefly just a few seconds out of there AIMS exam. Here is the patient, schizophrenic and he has mainly a problem with the lips and buckle and tongue. Let's see if I can get back to -- here we go. So he can't stop any of that.

That's just constant what his mouth and tongue are doing makes it very difficult to eat. That's a baseline, periods after six weeks of the drug, he is asked to open his mouth. The tongue isn't moving, the lips aren't moving, the jaws aren't moving, jaw is not moving. Here is another patient to show you the different types of way the TD manifests itself. This is basically in this patient's fingers and toes.

So if you are particularly looking at his finger, this is non-stop all the time. He can't write, he can't type, he can't hold a spoon or a fork or a knife. The toe is also inhabited the way he can walk and that's nonstop and he can't do anything about it. Here he is six weeks later he is asked to reposition himself in his feet, step back, seat back, put your feet on the floor. Little to no movement may be a little bit of wiggling still in his toe.

Here is a woman who is a high functioning -- she works in an office and her problem mainly here is with her tongue, this has isolated her completely as you can imagine. In this exam, she is only asked to open her mouth, she is not asked to move her tongue anywhere, just open your mouth.

You can see there is lip smacking, the tongue comes out, she is asked to open her mouth again. I apologies for the camera work, and then the tongue just comes out. She has no control over what her tongue is doing, makes it difficult to eat and to communicate. Here she is at the end of week six. Again asked to open her mouth, looks quite happy at the end of week six. I've shown you just small regions at a time, not surely picking the data looking for all the train racks that are in here and here is one of those. One of those people who the entire body is affected the trunk, the legs, the mouth, the tongue trying to clinch her hands together.

She can't stop moving this, it's constant. Here she is at week six asked to put her feet flat. The video is still running. All of the body movements are abnormal and voluntary body movements have ceased. Again this was a -- this was a program that was completely built at Neurocrine from scratch starting about 10 years ago. We developed and discovered all the compounds in-house again composition of matter now going up to 2029 with extension up to 2034. This is issued in other worldwide patterns attending. Financially the company is in very good shape, we reported the Q1 ended with $273 million in cash. We should end the year with north of $240 million, we have plenty of money now to take this all the way through the commercialization both in tardive dyskinesia and to reps.

And I'd be happy to answer any questions.

Question-and-Answer Session

Tazeen Ahmad – Bank of America/Merrill Lynch

I have a couple for VMAT. Can you may be talk to us about what your plans are for partnering when you think it would be a good time and also what the timeline is so when you think you could be commercial?

Kevin Gorman

Yeah, so partnering, we -- like I said, we plan on commercializing this in the United States ourselves. This is not certainly that needs several hundred rep sales force, this is something basically between 100 and 125 reps can cover all of the prescribing docs here in the U.S. Ex-U.S., we will entertain -- start to entertain looking for a partnership, but not this year. We would start that next year we have our hands full right now with pushing both of these indications forward plus all the other work that we have on the company that I haven't talked about.

As far as the broad timelines here for TD, the end of Phase IIb meeting is going to be in June. We'll have the meeting 30 days afterwards in July, that's when we can then lock the trial design and start the Phase III program. We look at that as taking approximately 18 months. So look at 2016 is when we are filed 2017 in this commercialization.

Tazeen Ahmad – Bank of America/Merrill Lynch

Since you really didn't talk too much about the endocrine program, excuse me the Violet Petal Study is what I am trying to say. And can we talk about elagolix and what kind of data to expect when AbbVie does release top line data. So there has been some talk about whether or not you'd be having data either this year or early next year, but what are you hearing from AbbVie and what their timelines are?

Kevin Gorman

Yeah, it's completely up to AbbVie about the timing and the extent of the data release. They have stopped -- they stopped the recruitment in the first Phase III, they finished with that. So they have all the patients they need for the 875 to enroll in that program. One would expect then that the top line data as they said, they will have available in second half of this year. And so then it is up to AbbVie as to how much data they are going to disclose and exactly when they would disclose that, but they've said that they will have the data in the second half of this year.

Tazeen Ahmad – Bank of America/Merrill Lynch

Can you just remind us what your agreement with AbbVie is from a financial perspective?

Kevin Gorman

Yeah. So there was a $75 million upfront payment, $525 million in milestones. Of those milestones, two-thirds are well other than, there is $50 million of that 525 is post commercialization. So the vast majority 475 is all pre-commercialization milestones. Of that 475 two thirds is just four elagolix for endometriosis and uterine fibroids, so approximately $300 million is on that. And then we have royalties that are quite good throughout the world on that.

Tazeen Ahmad – Bank of America/Merrill Lynch

And then very quickly, can you just compare the market opportunities for endometriosis and uterine fibroids which one might be bigger and which one do you think could take a little bit more time to establish the market for us?

Kevin Gorman

Well I think that there is no good treatment for either one of the diseases currently. And so I think the patient population and certainly the clinics, the clinicians are looking for a safe and effective drug here and they've been enthusiastic in our discussions with them on elagolix. The patient population in the United States that has endometriosis has been estimated to be approximately 10 million that has uterine fibroids as larger 12 million to 14 million here just in United States and approximately equal numbers in rest of world.

So I think they are both quite large patient populations, real good product opportunities that are available for AbbVie here. And one of the other thing that's very nice about this is that, the prescriber here for such a large diseases is very concentrated OB/GYN. So it's not a GP type of sales force that's necessary here.

Tazeen Ahmad – Bank of America/Merrill Lynch

Okay, I'm going to squeeze one more in. You recently completed a cash raise, what are your plans for deployment of that capital?

Kevin Gorman

Yeah so in February, we did a very successful follow on offering. We netted about a $133 million after fees into the company and that was just a one day road show. There were two goals in that raise one of which is to raise the capital. The other one was, we were finding that we were having high demand from some very significant funds that we are finding it difficult to buy into our stock without running up too much. And so we were able to add a number of additional long quality shareholders in there.

As a matter of fact I think the top ten buyers into the stock were new shareholders that came in. And our existing large shareholders and -- up also into it. So it turned out to be a highly successful.

With the money now, what that allows us to do is it allows us to push both TD and TS simultaneously and very aggressive through the clinic. In addition, we have eight other programs that are ongoing at any one time in R&D at Neurocrine. We don't talk about any of those until they’ve actually hit the clinic. And I would be disappointed if we didn't have yet another completely new indication with the completely different target from elagolix or VMAT2 this year in the clinic and that allows us to keep aggressively moving those through the clinic.

Tazeen Ahmad – Bank of America/Merrill Lynch

Okay, great. This was very helpful thanks everyone for coming and thanks Kevin for presenting.

Kevin Gorman

Thank you very much.

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