Bullish on Neurocrine Bio After Latest Clinical Trials

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 |  Includes: ABT, NBIX
by: Jason Napodano, CFA

On May 24, 2010, Neurocrine Bio (NASDAQ:NBIX) announced that the Daisy PETAL (Study-901) program provided statistically significant results in all top-line primary and secondary endpoints testing the company’s proprietary, orally-active nonpeptide Gonadotropin-Releasing Hormone (GnRH) receptor antagonist, elagolix, in patients with endometriosis. In addition, the company confirmed that the daily scales for menstrual and non-menstrual pelvic pain, developed with extensive input from the U.S. FDA and patients, functioned well in a clinical trial setting. The phase II Daisy PETAL (901) study enrolled 137 women with endometriosis into one of two treatment groups; elagolix 150 mg (n=66) or placebo (n=66) once daily for two months of treatment, in a double-blind design.

Top-line results at week eight confirm that elagolix is associated with a statistically significant reduction in the two co-primary endpoints, Dysmenorrhea (severe uterine pain during menstruation) and Non-Menstrual Pelvic Pain (NMPP), and the exploratory endpoint, Dyspareunia (painful intercourse), when compared to placebo based on the ITT population.

Data at Week 8

Baseline

Elagolix

Placebo

Change in Baseline (ITT population) of…

Dysmenorrhea (mean, 0-3)

2.1 / 2.1

-1.13

-0.37

Non-Menstrual Pelvic Pain (mean, 0-3)

1.4 / 1.3

-0.47

-0.19

Dyspareunia (pain, 0-3)

1.6 / 1.3

-0.61

-0.23

All p<0.01

Click to enlarge

Management also conducted a responder analysis that demonstrated clinically meaningful improvement of 30% or greater from baseline on all three endpoints (ITT population).

Data at Week 8

Elagolix

Placebo

Responder Analysis (>30%)…

Dysmenorrhea

63% 1

33%

Non-Menstrual Pelvic Pain

63% 1

33%

Dyspareunia

58% 2

34%

1 = p<0.01 2 = p<0.05

Click to enlarge

Secondary endpoints also demonstrated statistically significant improvement from elagolix subjects versus the placebo on validated efficacy outcome assessments.

Data at Week 8

Elagolix

Placebo

Secondary Efficacy Endpoints (ITT population) on…

Patient Global Impression of Change

(PGIC) “much” or “very much improved”

60%

30%

Endometriosis Health Profile 5

(EHP-5) Related-Pain Assessment, 0-100

-28 pts

-13 pts

Composite Pelvic Signs & Symptoms Scale

(CPSSS) Reduction from Baseline (9.5), 0-15)

-4.45 pts

-2.19 pts

All p<0.001

Click to enlarge

On November 22, 2010, management provided a follow-up to the active (placebo-controlled) dosing portion of the program at week 24. The data included open-label placebo crossover patients for the next 16 weeks and demonstrated further decrease in all three endpoints, NMPP, Dysmenorrhea, and Dyspareunia for the 150mg elagolix arm, as well as reductions in pain scores for placebo patients during the open-label crossover portion.

Data at Week 24

Elagolix

Crossovers

Secondary Efficacy Endpoints (ITT population) on…

Patient Global Impression of Change

(PGIC) “much” or “very much improved”

86%

74%

Endometriosis Health Profile 5

(EHP-5) Related-Pain Assessment, 0-100

-36 pts

-30 pts

Composite Pelvic Signs & Symptoms Scale

(CPSSS) Reduction from Baseline (9.5), 0-15)

-5.5 pts

-4.5 pts

Click to enlarge

The continued improvement in the active 150mg elagolix group is highly encouraging. However, we are even more impressed by the strong results from the placebo crossover group. In our view, the data from Daisy PETAL clearly shows that elagolix is working.

We are also encouraged by the fact that during the phase II Daisy PETAL program, the elagolix demonstrated excellent safety and tolerability. Discontinuation due to adverse events (AEs) was low at 4.4% for elagolix vs. 1.4% for the placebo during the first eight weeks of the program. The discontinuation rate increased to only 5.1% at week 24. The most common adverse event reported more often with elagolix than with placebo was nausea (~10% of the subjects). This was consistent with what we saw in previous clinical studies. Importantly, there were no elagolix treatment-related serious adverse events (SAEs).

Collaboration with Abbott Labs

In June 2010, Neurocrine signed a collaboration agreement to develop and commercialize elagolix with Abbott Labs (NYSE:ABT). Abbott received worldwide exclusive rights to develop and commercialize elagolix and all next-generation GnRH antagonists for women's and men's health. This includes potential indication beyond endometriosis pain, such as uterine fibroids, adenomyosis, premenstrual dysphoric disorder (PMDD), polycystic ovarian syndrome (PCOS), breast cancer, or benign prostatic hypertrophy (BPH).

Abbott made an upfront payment of $75 million and will fund all ongoing development activities. Neurocrine is eligible to receive additional milestone payments of approximately $500 million from Abbott for the achievement of certain development, regulatory and commercial milestones. Neurocrine will also receive funding for certain internal collaboration expenses, plus royalty payments (we model 20%) on any future product sales. On the conference call highlighting the deal, CEO Kevin Gorman noted that the “vast majority” of the $530 million milestones is for development. This gives us confidence that Neurocrine will recognize a significant portion of these milestones prior to potential FDA approval in 2013 or 2014. The IND has since been transferred to Abbott. Neurocrine will continue to handle the CMC and commercial scale-up for elagolix, which will be funding by Abbott Labs.

It’s a ‘home run’ deal in our view for Neurocrine Bio. Abbott is the pioneer and market leader in GnRH antagonists with Lupron (leuprolide) for the treatment of hormone-responsive cancers such as prostate cancer or breast cancer. The drug is also used by Ob/Gyns for the treatment of endometriosis and uterine fibroids, as well as to treat precocious puberty, and to control ovarian stimulation in In-Vitro Fertilization (IVF). Abbott has a strong appreciation for the GnRH mechanism and the company is clearly committed to see elagolix a success with Lupron expected to lose patent protection in 2015. Abbott’s Lupron sales in 2009 were $800 million ($540 million U.S.). We believe that Abbott will look to replace Lupron in the Ob/Gyn market with elagolix thanks to superior efficacy and tolerability, as well as patent protection.

Next step – Meet with the FDA

Neurocrine and Abbott requested an end of phase II (Type-B) meeting with the Division of Reproductive Products at the FDA in late September 2010. The meeting has been schedule for January 2011. In total, Neurocrine and Abbot should be able to sit down with the FDA and offer up data from 6 phase II programs (2 phase IIa and 4 phase IIb) on roughly 1,000 patients. This should allow Abbott to begin the phase III program during the first half of 2011. We expect that the pivotal phase III program will include two large-scale (n~500) patient programs with co-primary Dysmenorrhea and Non-Menstrual Pelvic Pain endpoints. The exploratory Dyspareunia endpoint may also be tested in the phase III program. There will also be a long-term (n~400) safety program. Depending on Abbott’s European strategy, one of the two phase III programs may include a head-to-head non-inferiority program vs. Lupron for the European submission. Abbott is also considering a phase II program in uterine fibroids to begin during the first half of 2011.

Background info on Endometriosis

Endometriosis is a medical condition characterized by growth of the endometrium (uterine tissue) outside of the uterus, most usually on the pelvis, that affects an estimated 100 million women of reproductive age worldwide, or about 5%-10% of the female population according to the World Endometriosis Foundation. There are an estimated 8 million women affected by endometriosis in the U.S. Endometriosis also occurs in a small percentage (2-4%) of post-menopausal women. Symptoms of endometriosis are severe recurring pain that can include dysmenorrhea (menstrual pain), dyspareunia (painful sex), dyschezia (painful bowel movements) and dysuria (painful urination).

Endometriosis is caused by an excess of the hormone estrogen, and thus can manifest during peak reproductive years. Hereditary and environmental factors, as well as associated infections (such as HPV), can increase incidence and severity. The disease is often treated, ineffectively, by a number of medications. NSAIDs are used to treat mild-to-moderate pain associated with endometriosis. Progesterone or progestin and hormonal contraceptives are used to regulate estrogen levels when appropriate. In fact, industry data shows that almost 20% of all oral contraceptives prescribed are written specifically for the treatment of endometriosis. Steroids and aromatase inhibitors are used to block estrogen levels and endometrium growth. However, these have significant negative side-effects. Lupron, a gonadotropin depo shot, is used to lower estrogen levels and slow endometrium growth. However, Lupron shuts down estradiol production and puts the body into “medicated menopause”, resulting in significant side effects such as hot flashes and a reduction in bone mineral density. In the most severe cases, a hysterectomy is performed.

Elagolix, a gonadotropin-releasing hormone (GnRH) antagonist has efficacy characteristics similar to Lupron for the treatment of endometriosis, but with less potential for bone mineral density loss. The drug works by blocking the action of GnRH and suppressing luteinizing hormone and follicle-stimulating hormone. There are a few other GnRH molecules on the market, but none that are oral in dosing or have amassed the clinical data of elagolix. Therefore, we believe that Neurocrine can achieve significant market share gains with elagolix upon commercialization. Most women shy away from Abbott’s Lupron due to side-effects. Nevertheless, Abbott is still the market leader in this category. As such, we believe that Neurocrine has the ideal pharmaceutical partner to further develop and commercialize elagolix in Abbott Labs.

Peak sales for elagolix in the U.S. are $500 million. We believe a specialty Ob/Gyn sales force of 200 to 250 representatives can effectively target greater than 90% of the market.

Uterine fibroids

Beyond endometriosis-pain, uterine fibroids represent an attractive second indication for elagolix. Uterine fibroids or adenomyosis are benign tumors that form on the wall of the uterus. They are the most common type of growth found in a woman's pelvis and are most common in women aged 30-40 years. While many women do not have symptoms, depending on the size, location and number, uterine fibroids can cause heavy menstrual bleeding, can put pressure on the bladder and rectum, and can cause pain and nausea. Symptoms can also include miscarriages and infertility. Depending on the symptoms, treatment sometimes requires surgery. This is a potential billion-dollar market in the U.S. given the significant number of women affected and the lack of pharmaceutical options available.

Benign Prostatic Hypertrophy

In men’s health, elagolix has potential in benign prostatic hypertrophy (BPH). BPH is defined by enlargement of the prostate gland. As the prostate grows larger and presses against the urethra, normal flow of urine is hindered. A competitor is developing an injectable peptide GnRH antagonist currently in phase III trials. However, Neurocrine Bio believes that a significant advantage may be provided by oral non-peptide GnRH antagonist, such as elagolix. Moderate to severe BPH affects an estimated 21 million men in the U.S. Additionally, more than 40% of all men over the age of 60 suffer from the symptoms of BPH. Worldwide sales of current treatments for BPH exceeded $3 billion in 2006.

Conclusion

With a strong financial position, we believe Neurocrine is in an outstanding position to build shareholder value over the next several years. The company exited the third quarter with $130 million in cash and receivables, with the potential to earn several hundred million more as clinical development progresses. We are big fans of elagolix and impressed with the recent Daisy PETAL study results. The company’s dramatically improved financial position affords management the opportunity to push forward the development of internal pipeline candidates, including VMAT-2, as well as in-license new pre-phase II molecules within the company’s core CNS focus. We recommend accumulating the stock at today’s price, up to our $12 target.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.