Neurocrine Biosciences, Inc. (NASDAQ:NBIX)
Q2 2014 Earnings Conference Call
August 7, 2014 08:00 AM ET
Jane Sorensen - IR
Kevin Gorman - President and CEO
Tim Coughlin - CFO
Chris O’Brien - CMO
Mohit Bansal - Deutsche Bank
Good day, everyone and welcome to Neurocrine Biosciences Second Quarter Earnings Call. 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). Please note this call maybe recorded. It’s now my pleasure to turn the conference over Kevin Gorman, President and CEO. Please go ahead, sir.
Thank you. And thank you everyone for joining. It’s pleasure to be here in this morning to talk about our Q2 earnings and update you on the programs. With me this morning is Tim Coughlin, our CFO; and Chris O’Brien, our Chief Medical Officer. We will be going over the financials and then we will give you an update on our R&D programs. But before we do that, Jane could you please read our Safe Harbor statement.
Yes. Good morning. 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?
Thank you, Jane. Our financials are right in line with guidance and Tim why don’t you take everyone through it.
Sure. Thanks, Kevin and good morning, everyone. Appreciate you joining us for our second quarter earnings call today. Our second quarter 2014 again that our financial plan with a net loss for the quarter of $13.4 million or $0.18 per common share outstanding.
Our second quarter loss did increase over the first quarter loss of 2014 and we expect this trend to continue through the year. Research and development cost will increase as a result of initiating Phase III development of VMAT2 inhibitor NBI-98854 and tardive dyskinesia as well as the commencement of our clinical efforts with the same compound in Tourette’s syndrome. In addition there are other compounds for different targets and separate disease stage and other stages of pre-clinical work that are being shipped at GLP pre-clinical studies. The GLP studies are significantly more expensive than a non-GLP testing.
Our year-to-date loss is $25.2 million with $0.35 per share, this compares to $24.3 million or $0.36 per share in the first half of 2013. The increase in year-to-date net loss for the prior year is primarily driven by an increase of share-based compensation expense of $2.4 million when compared to the first six months of 2013 and a decrease in revenue under license fee amortization of $1.4 million. This was offset by a lower development cost which reduced by $2.8 million for the first half of 2014 compared to 2013.
As I already mentioned these external development costs such as GLP, our pre-clinical GLP testing, GMP manufacturing of API and finished good products, clinical trial related expenditures et cetera will rise through the rest of 2014 and continue to increase into 2015. We expect our research and development cost increase steadily through the rest of the year. We expect our G&A cost to remain relatively constant at $4.2 million per quarter for the balance of 2014 or approximately $17 million for the entire year of 2014.
In 2015, we expect G&A cost to rise as our commercial efforts related to VMAT2 will begin in August. Our cash position remains strong and in the second quarter with $0.25 billion in the bank, or in 2014 with at least $230 million in cash and investments with no debt. We filed our 10-Q yesterday after market close and that filing contains additional information about the quarter. I will try to keep my comments brief, it is relatively straight for quarter from a financial standpoint and we will go ahead and attain any questions in Q&A but for now, I will turn it back over to Kevin.
Thank you, Tim. So Chris is now going to talk about our pipeline. Particularly, VMAT2 you know that at the end of the June, we had an end of Phase II meeting with the FDA and I am pleased to say that with a very collaborative and very productive meeting that we had. You’ve read the highlights in the press release and now Chris is going to go through some details for you.
Thanks Kevin and good morning to the participants, thanks for calling in today. As Kevin pointed out, at the very end of June, we had our Type-B meeting, end-of-phase II meeting with the FDA and the division participants, a review team were very engaged. We got the detailed preliminary written comments before the meeting in response to our briefing package and we had an opportunity to focus on the important topics at the end of phase II meeting. We got our official meeting units back a just couple of days ago and a lot of us know that at this call.
The key take homes from the meeting were after extensive review of the clinical that we had in hand to date, I think Phase I and Phase II studies that have been completed as well as the support of pre-clinical and manufacturing data. We reached a good understanding of what they need to see in an NDA application for tardive dyskinesia. And to satisfy that NDA requirement, we will be conducting a single pivotal clinical trial, Phase III trial with the placebo-controlled in tardive dyskinesia. And in discussing the nature of that trial, the protocol includes several important key features. One is we had agreement on the population patients, the patients that will be rolled in Phase III are identical to the patients that were rolled in the Kinect 2 study with one exception. We only got a few patients with tardive dyskinesia due to metoclopramide exposure in patients with gastrointestinal disease. And at the FDA’s request, we will not include GI patients in the Phase III trial, that’s a minor point because the use of metoclopramide of cause and subsequent TD has plummeted since the FDA’s release of the blackbox warnings about metoclopramide and its TD risk.
So we will be focused on patients with schizophrenia, schizoaffective disorder, bipolar disorder, depressive disorder and neuroleptic-induced tardive dyskinesia of moderate to severe intensity exactly like we enrolled in Kinect 2. The second point that we have firm agreement is that the primary endpoint is a change from baseline in AIMS as measured by the blinded central raters. And this is exactly what we did in Kinect 2; we will do this in Kinect 3.
Third point of discussion on agreement is for the dose and dose regimen for NBI-98854. As I mentioned, I think in an earlier call, we have done extensive exposure response analysis with the data that we had from our Phase II trial. And I mentioned at that time we were very comfortable that we knew the kinds of exposures that were necessary for a robust clinical response and as you recall we have had experience with dosing in-patients between 4.5 milligram per day up to a 100 milligrams per day for at least two weeks and that we have seen the most robust efficacy in that 50 milligram to 75 milligram dose range and with our extensive exposure response modeling with the help of some FDA consultants.
The final doses chosen for Phase III were 40 milligrams and 80 milligrams, so we will have a randomized double-blind placebo-controlled parallel group fixed dose trials that is patients will be randomized to either placebo 40 milligrams or 80 milligrams and comparison will be AIMS change from baseline at the end of the placebo-controlled trial compared to active placebo. Very straight forward study design, very straight forward statistical approach, very straight forward dosing.
One key point for this drug and this indication is that we want to add to our extensive safety database and so we will do that in two ways. Patients in the placebo-controlled trial will continue on active drug out to the end of the year. And what that means is that patients on 40 milligrams or 80 milligrams who have been randomized at baseline to one of those doses, will continue on those doses in a blinded fashion and patients who were initially randomized to placebo will be randomized in a blinded fashion to either 40 milligrams or 80 milligrams for the remainder of the active portion.
So, it’s not an open-label extension, it’s a blinded active drug extension after the end of the year that will give us a one-year data for a large group of patients, 240 patients will be randomized and this will give us some good safety data, blinded safety data at 40 milligrams and 80 milligrams. In addition to the placebo-controlled trial Kinect 3 will also be running in parallel, an open-label safety trial with those two doses in a group of subjects, getting close to 150 subjects in the open-label safety trial although that number is not that critical. It will be over a 100 subjects but we will allow almost like an open access trial if you will in subjects with moderate to severe TD. So, this will give us a good number of subjects with up to one year of continuous treatment.
Alongside the pivotal trial and the open-label safety trial, we have some additional Phase 1 work that we will conduct. As I have mentioned on previous calls, we will run our parallel QT study, we will run special population study in patients with renal impairment.
We will run another drug interaction study. We have already done a couple. We have got another one to do to satisfy the standard of requirements for a full new chemical entity, a new indication program for tardive dyskinesia; so, a very good discussion with the FDA. They say they were very engaged to have some very good suggestions for us and we are very pleased with the meeting and its outcome and we’ve already mobilized a lot of the forces to get this process going in advance of the meeting, waiting for the final minutes to confirm what we understood to do the path forward and now that is happening in earnest. We have already qualified close to 70 of the 80 clinical sites that were running this trial in North America. We have very good investigators. Approximately, a quarter of those investigators were our high performing Kinect 2 investigators and that we had some additional new sites that we’ve brought on Board.
We are gearing up to have all the contracts done and the IRB documents in place such that we can actually begin screening patients in September with randomization occurring in October. We believe that the total duration of this trial if you include both the treatment and the recruitment phase, I am going to go out on a limb and say it’s about an 18 month endeavor which allows us to keep to our projected time lime of NDA filing in 2016. The open label safety trial will run concurrently starting probably Q1 and that trial doesn’t have to -- we don’t have to complete all subjects through one year. What we will have is a cut-off date and we will take all the safety data up through one year in the subjects who have reached that cut-off date so that we don’t compromise the NDA filing time that we talked about.
Obviously in parallel with the clinical work, the other Phase I studies, the Phase III studies will be the completion of our pre-clinical package, the two-year carcinogenicity study has been kicked off and we have, as Kevin -- as Tim mentioned, we have some GMP manufacturing campaigns that are underway for commercial validation lots and all the supplies necessary not only for completion of these studies but prepares for the potential launch in the product launch approved.
While all the hard work is going on in tardive dyskinesia, we have also been working very hard on our pediatric program, NBI-98854, also used for the treatment of tics (Ph) disorder and Tourette syndrome and we had a very productive interaction with the FDA allowing us to pull together what the agency needs for us to filing the NDA at the new IND. So this will be a separate IND for Tourette syndrome from our tardive dyskinesia IND. That document obviously includes a lot of work around what does the pediatric clinical trials look like, what does the development program looks like, what does the pre-clinical juvenile toxicology data show, how do we do dose selection in a pediatric population and our PK/PD and exposure modeling we’ve done to help us select what we believe will be safe and effective exposures in children down to the age of six.
So it’s a lot of work that goes into that IND package. We have the electronic publishing of that package going on as we speak and that IND will actually be submitted to the FDA in the next few days, while the publishing, once the publishing is finished. So it’s actually a large amount of work. The team has been very busy with the IND submission in conjunction with the tardive dyskinesia activity. The clinical group here at Neurocrine is small we are about 20 people and everybody is all hands on deck to get this done. That’s the clinical update on the tardive dyskinesia and Tourette syndrome program. Obviously we are very excited about our current progress and very excited about what’s coming over the coming months.
While that’s going and some of you aware we had our twice a year meeting with our colleagues at AbbVie on the Elagolix program. And the American team went up to Chicago and that with our AbbVie colleagues and they gave us an update on all the things that are going on with Elagolix. As you recall, we are not involved in the day-to-day operations of that program, so we will get a twice a year update. And very pleased at multiple levels with what’s happening. There is massive investment of the people and resources into the Elagolix program, both the endometriosis Phase III program and uterine fibroid Phase II program.
That’s just a clinical efforts but the kind of commercial efforts were market research and all the health economics and outcomes research that AbbVie is very good at. They are putting a huge initiative looking at things like quality of life and productivity and that sort of thing. So, the endometriosis studies include the two Phase III trials. The first trial Violet Petal study is on track. They have obviously completed a randomization, close to 875 subjects, the largest endometriosis trial ever conducted in the history of drug development. And this trial, if things go as plan, as you know there is a six month placebo-controlled trial. The last patient, last visit will be in November and then AbbVie does their normal process of data cleaning, QA et cetera than data analysis and sometime in that December, January timeframe will be a reporting of these top line results. Those details remain to be worked out and obviously that’s AbbVie’s call of when that happens but that’s very exciting. So, end of year readout for the Violet Petal Study and meanwhile, so the Violet Petal Study is North American trial, Canada, U.S. Puerto Rico.
And the Solstice Study is international trial with a number of countries including the U.S. participating in that study, that’s a slightly smaller study about 788 subjects I think in that trial but nearly identical design. And both studies use the same co-primary endpoints of dysmenorrheal and non-menstrual pain measured with the daily diary as the endpoint, that’s what we used in the 901 or so called Daisy PETAL Study.
So, very excited, I am looking forward to the results from that trial at the end of the year. So, I think I will stop there with the discussion, so you have heard about VMAT2, you have heard about Kinect 3, you have heard about AbbVie and Elagolix. We are continuing to make progress with our discovery research and preclinical programs. The two programs that are in later stage preclinical are continuing to survive the gauntlet of toxicology which is obviously quite a severe hurdle to overcome.
If they continue to do well and finish up the work this year then we look forward to talking to you about the IND for those CNS oriented compounds entering humans in 2015. So, I will turn back to Kevin.
Thanks, Chris. And just to add on what Chris was saying in that program and in parallel with the clinical team’s discussion with the FDA. There has been CMC discussions with the FDA and those are all progressing really well with no issues going on there, so the CMC is tightly buttoned up also. As far as the AbbVie meeting also there I am pleased to say that we were there as they were closing in on the agreement for the acquisition to Shire and there certainly doesn’t appear to be any distraction from the team or any movement within the team thus far based on that acquisition. So, with that I would like to open it up for questions.
(Operator Instructions). And we will take our first question from Robyn Karnauskas with Deutsche Bank. Please go ahead. Your line is open.
Mohit Bansal - Deutsche Bank
Thanks. This is Mohit for Robyn. Thanks for taking my question and congratulation on the progress. So, my first question is like just wanted to learn about your discussions with FDA around the fact that one pivotal trial will be sufficient for the filing, what were the FDA comments around that?
Most of the comments were based on the understanding of what constitutes adequate to well controlled trials and we reviewed the Kinect 2 results and obviously that was a very robust trial conducted in a manner that could be considered adequate to well controlled. Obviously that’s subject to the normal scrutiny and review that occurs at the time of the NDA. So, we all are waiting for their final detailed review that occurs after the NDA submission but the Kinect 2 study could constitute one of the, one adequate to well controlled trial.
Mohit Bansal - Deutsche Bank
Got it, that’s helpful. And then will there be a dose escalation phase in this Phase III trial or all patients will start of fixed dose from day one?
It’s a fixed dose parallel group trial.
Mohit Bansal - Deutsche Bank
And then I mean the last one is like, just wanted to make sure that I got it right on Violet Petal Study, so the timelines for data readout are the end of the 2014 and AbbVie will communicate to the street, right?
That is correct. AbbVie will communicate with the street until regular customary process of bringing the database, unlocking and then unwinding. We imagine that that’s going to somewhere at the very end of the year or early next year in January. But again that timing is completely up to AbbVie and discussions with them on the extent of disclosure that they will be getting and providing to the Street at that point in time.
And we will take the next question from [indiscernible] with Cowen. Please go ahead. Your line is open.
I was hoping for a bit more clarity on the choice of dose for Phase III in particular in the light of Kinect data and the 50 milligram dose to a 100 milligram dose and the variability for sometimes at the end of the trial. So is it why is the safety profile looks pretty good even at a 100 milligram, why not go for a higher dose. And also what should we expect from the 40 milligram dose in the Phase II trial?
So a couple of things, just to comment about use of the word variability. In these studies, the variability that we start with sometime with sorting out is not related to a drug. The variability with our drug is very predictable PK is very nice, good bioavailability, good predictable exposure. The variability comes in the struggle in the early Phase II studies was around who was doing the AIMS and how they did it. And that’s what we spent so much time working on and while we ended up with the blinded central video raters that we used in Kinect 2 and that we will use in Kinect III. So once that’s done, the variability goes away. Secondly also to the other point, we spent extensive effort of viewing our exposure response data and working with our FDA curtailments we found that we had a very clear story that is you need a certain amount of exposure to get a response. And if you are going to be a responder, you respond robustly once you have that exposure. It is very clear that as you go up on exposure for example, exposure seen with doses of 100 milligrams, you get no incremental benefit, no additional benefit. You just get more exposure and at a small level although the drug was as you said visibly well tolerated, we see some signs that kind of exposure for a long-term usage probably not where that are appropriate.
But the main driver of our dose selection is that exposures over 75 milligrams or 80 milligrams don’t get you anything, you don’t get additional benefit. And for tardive dyskinesia, what you see is somewhere in the range of 60% of subjects become profound responders with a marked reduction in tardive dyskinesia. And you get some percentage of patients, 20% of patients who are kind of non-responders and about 10% of patients somewhere in that range, 10% or 20% are partial responders. But increasing exposure doesn’t change that once you get over a certain threshold. What we found is that the FDA really wants to see a minimal effective dose and maximum effective dose. And what we were able to show them with our data is that patients getting dosed at 25 milligrams are comparable to placebo.
At 50 milligrams yes we have a good number of responders, but not the maximum number of responders. Once you get up to that 75 milligram, 80 milligram exposure range, you are pretty much maxed out. And so that’s why we were able to reach an agreement with them that we with our data from Phase II and with additional data from these two doses at Phase III we will have a complete spectrum of minimal effective dose and maximum effective dose. And 100 doesn’t get you anymore, 25 is like placebo and 40 and 80 are perfect balance.
And so what were to happen you have to keep both doses, what if something that happens to the 40 milligram dose?
That’s a good point. We do not have to get both doses. Our expectation is that we will do our hypothesis testing with the 80 milligram dose first, and then with the 40 milligram dose. And we do not have to hit both.
Okay. So if we were to kind of 40 milligram to sale, you still can file with 80 milligram?
And it appears we have no further questions at this time. I will turn the program back over to our presenters for any closing remarks.
Yes, thank you very much everyone for joining us this morning. Just to sum up, as you can see, we are real pleased with the outcome of our end of Phase II meeting. The hard work that the clinical group put in the Phase I and Phase II portions of this program have really paid off and the agency appreciated that. With Fast Track that allows us to have continued communication with the division and to again build on the relationship that we have with the activation as Chris said they are very engaged and very communicative at this point. So, and obviously we have a big data event with AbbVie that’s coming up at the end of the year and so we are very much looking forward to that. So, over the next six months, we are going to look forward to seeing you, we have a number of conferences Morgan Stanley in September and Nomura in early November, Jefferies over in London in mid-November and then Piper and Deutsche Bank and Oppenheimer going through the rest of November and December and then finally JP Morgan in January.
So, at all those conferences, we are going to be able to keep you I think quite up to date with the lot of communication and disclosures from the company as we move forward with these programs and others. So, with that I thank you very much for your attention and look forward to meeting with all of you in the coming months.
This concludes today’s program. Thank you for your participation. You may disconnect at any time.
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