Kevin Gorman - President and CEO
Tim Coughlin - VP and CFO
Chris O'Brien - CMO
Jon Lecroy - Hapoalim Securities
Jason Napodano - Zacks Investment Research
Nick Bishop - Cowen & Company
Neurocrine Biosciences, Inc. (NBIX) Q1 2011 Earnings Call May 4, 2011 8:00 AM ET
Welcome to today’s conference. 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 is now my pleasure to turn the conference over to the President and CEO of Neurocrine Biosciences, Mr. Kevin Gorman. Please go ahead sir.
Thank you very much and welcome everyone. I’m joined today with Tim Coughlin our CFO; and Chris O'Brien, our Chief Medical Officer. Before we start out Tim will 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 are related to 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.
Thanks Tim. I’d like to start up by apologizing for the short notice for this call we normally give you all at least a weeks notice the time and date of the call. What we wanted to make certain before we scheduled call is that we had our minutes from the FDA from our end of Phase II meeting on elagolix, and we did receive those late last week. And we will be talking about that that was a very good meeting that we had with the agency and Chris O'Brien is going to give more color to that.
However, right now let’s start out with Tim running through the financials.
Okay. Thank you, Kevin and good morning again. I guess thereafter market close we released our results for the first quarter of 2011. Those are another good quarter, we met our financial plan for the first three months of 2011 and on target for both annual net income of 34 to 39 million and the net cash burn of 3 to 6 million for 2011. This is consistent with the guidance we have provided at the beginning of the year.
Our net income for the first quarter was 2.9 million or $0.05 per share compared to a net loss of 8.6 million or $0.19 loss per share for the first quarter of 2010. Its $11 million change in operating results is directly attributable to revenue earned under the Abbott and borrowing earning of high and collaboration agreements that we entered into during the second quarter of 2010. Revenue under collaboration agreements was 12.5 million for the first quarter of 2011, compared to 0.8 million for the first quarter of 2010.
Amortization of upfront fees accounted for $9.2 million of revenue in 2011. Additionally, we recognized 3.3 million in sponsored research and development funding consisting of FTE support and reimbursement of external development expenses.
Research and development expenses and general and administrative expense were in line with our expectations. These expenses also consistent with our 2010 expense levels. Recall that in 2009 we implemented our last significant round of company-wide cost controls. About the first quarter of 2010, most of our expense mitigation strategies have been fully implemented. And the expense reductions realized. So, the fixed cost portion of our expenses shows minimal change period-over-period. However, one of our variable expense items in research development specifically our external development expenses decreased period-over-period. External development spending in the elagolix program decreased from 2.2 million in the first quarter of 2010 to 1.1 million in the first quarter of 2011, reflecting a shift to responsibilities for the elagolix program from Neurocrine to Abbott.
This elagolix related costs savings was offset by an increase in external development spending on our VMAT2 program, which increased from approximately 100,000 in 2010 to 800,000 in 2011. We expect external development costs for VMAT2 to continue to increase during the balance of the year.
From a balance sheet perspective we ended the quarter with approximately 125 million in cash, investments and receivables. In March 31st, 2011, our investments were in fixed income highly rated commercial paper and corporate debt instruments that we have laddered from a maturity standpoint. The average maturity of these investments is approximately four months, now we have no investments in maturities over a year.
For those looking for additional financial details our 10-Q is now on file with the SEC. That concludes our prepared remarks on a financials. We will be glad to entertain any financial related questions later in the call. And with that I will turn it back over to Kevin
Thanks Tim. And so as you can see we are right on track with our guidance for the quarter and continue to be on track for the entire year. It's been a real good quarter for us from an R&D perspective not only with the end of Phase II meeting, but also the results that we spoke of earlier in the quarter on our first foray into patients with our VMAT2 program and lead compound there NBI-98854, right now I’d like to turn it over to Chris and he can give you more detail on these two programs in addition to give us an update on our Urocortin 2 program. Chris.
Thanks Kevin. I’m happy to update on this projects, things are moving quite nicely. The elagolix collaboration with Abbott is moving full force with multiple initiatives for elagolix into endometriosis in Phase III, elagolix into Uterine Fibroids in Phase II, and many of those supportive studies that will round up the ultimately the NDA for submission. The end of Phase II meeting held on March 28th with the FDA was a productive meeting it was a very positive meeting. And this particular division has been engaged and consistent in their advice and recommendations and support for novel therapies in this space namely endometriosis.
And most importantly I think for us and for Abbott is that we were able to confirm that the two primary endpoints measuring dysmenorrhea that is menstrual pain and non- menstrual pelvic pain on a daily basis continued to be the end points that the FDA is interested in seeing used for registration trials. And as I think most people are aware we have had considerable experience with these co-primary daily scales as evidenced by the previously reported 901 study, this was the Phase II data reported last year that showed very nice separation of elagolix from placebo and had very good dynamic range and response characteristics etcetera.
So, having the FDA confirm that indeed this is the correct way to move into Phase III it was obviously very reassuring. In addition Abbott agreement was reached on how one deals with you end points things maybe into statistical tools that are appropriate. And in general we had very good discussion about applying these methods and having taken these going forward.
The balance of the discussion at the end of Phase II was focused on the adequacy of the pre-clinical package namely all of the Toxicology and other supportive studies that have been done, confirming, indeed, that the package that has been proposed and that the studies that have been completed will be appropriate for the NDA.
We also spoke in some detail about the overall design of the Phase III trials in endometriosis, in particular confirming again that pivotal trials six months in duration with placebo control are appropriate and we have some additional discussion about the inclusion/exclusion criteria about the numbers of subjects in the trial etcetera. All of these details are in Abbott’s hands now are in the finalization process for the protocols and we are working towards implementing these Phase III trials and as soon as final agreement for finalization of these protocols is in place. As you might imagine these are very large Phase III program with extended amount of work necessary to get hundreds and hundreds of clinical research sites qualified and contracts in place and recruitment strategies in place and the [FX] committee, the institutional review boards, approval in place etcetera. So, that is going full force now with collaboration between both Neurocrine and Abbott to get these sites qualified and up and running. So, we are planning obviously for things to go smoothly and if everything goes according to plan we would be looking at to begin Phase III trials later this year. Obviously, the finalization of the protocols between Abbott and FDA is a critical piece to that.
The Uterine Fibroid program is when the protocols are being finalized now and the sites identified for running these trials. The goal is to have these first Phase II study in Uterine Fibroid begin sometime in third quarter of this year. So, very productive, a very nice interaction. I was delighted to have the Abbott team now enjoy the same productive and supportive relationship that we have had with the division at the FDA. And as they drive this program forward really good to take advantage of such a productive and supportive relationship.
So, that’s the elagolix project in [generics] program. As Kevin mentioned we are very excited about the increasing activities surrounding our VMAT2 inhibitor program. NBI-98854 or in our short hand 854 is moving forward directly in Phase II here in the United States. As you know in our first Phase I trials under a CTA in Canada, due to some of the repeatedly with which these trials can be done under the clinical trial agreement or CTA. So, we are able to get those up and running working with one of our provider Phase I units actually two different ones. And then the Phase IIa exploratory study which we reported on some weeks ago, this was also done under CTA in Canada with one of the worlds experts in Tardive Dyskinesia and their institution where there were number of patients with Tardive Dyskinesia that qualified for rapid enrolment in that exploratory study.
So, we had used that Canadian process to get preliminary data package in hand also some additional CMC and pre-clinical work being conducted by my colleagues here at Neurocrine. And with this package we then submit [a meeting] request to the FDA where we can meet with the division to discuss opening the IND in the United States and in this case the IND would enable starting the first U.S. trial, in our case Phase II cross-over trial in patients with moderate to severe Tardive Dyskinesia. So, the FDA responded to our request and we have a meeting coming up with the division in June and assuming that things go well at that pre-IND meeting, the IND be opened shortly thereafter. And our goal is to be able start the Phase II cross-over trial here in the U.S. in the fall of this year.
The Phase II cross-over trial will be a placebo controlled comparison of two weeks of dosing with placebo to two weeks of dosing with active in random order in a group of approximately 32 patients with Schizophrenia Schizoaffective disorder who have Tardive Dyskinesia caused by their antipsychotic medication. We will propose that, we continue to use the abnormal and voluntary movement scale or aims as the primary endpoint along with the clinician global impression scale for Tardive Dyskinesia and a variety of secondary assessment along with the usual safety assessments from a pharmacokinetic data collection and some other measures. Now we like the cross-over trial design because it uses a within patient comparison minimizes some of the variability that one can see in small Phase II trials and allows us to confirm some of the details we need in hand as we prepare for the larger, longer duration parallel group trial which we plan on initiating early in 2012.
So, all these activity obviously is moving quickly. We are very pleased with the results we have seen in the Phase I and Phase II2a trials from Canada. We are very pleased to be readying up for a meeting with the FDA in June to open the IND and looking forward to starting the cross-over trial in the fall.
In the background of course, pre-clinical group here at Neurocrine will continue to setup and run the necessary supportive studies that will allow us to do the long-term Phase II trials in 2012. So, namely the three months Toxicology studies in animals that and as well as some additional CMC work for solid dose formulation that allows us to move the program ahead. So, very nice in the VMAT2 program, we are very happy with the results that we reported earlier and with the robust reduction in disconnect movement in the patients with moderate to severe Tardive Dyskinesia. And the profile that was it's very consistent with what we hoped for namely, minimal side effects although, though safety signals from laboratory or ECG data and a PK profile that was exactly what we had designed when we setup to set this program.
So, that’s VMAT2 and our next Urocortin 2 program, I think most of our listeners and investors know this project is now in a Phase 2a trial in patients with acute decompensated heart failure. It is a single center trial in run by the University of Otago in Christchurch, New Zealand. This project is designed to for the first time we look at infusion to the Urocortin 2 in patients that show up in the emergency room or intensive care unit with acute worsening of heart failure and then a fluid overload status, with shortness of breath and decompensated homodynamic state. And this trial was designed to enroll 60 subjects and as of my last conversation with the team there, they have completed enrollment of 43 subjects and are in the process of recruiting the balance for the 60 planned. As a single sector project this is something that will probably take another 6 to 8 weeks, but obviously it's subject to the ebb and flow of patients. And unfortunately, for our friends in Christchurch, earthquakes and major disasters that has had a major impact on the hospital there in Christchurch and obviously the people and the community. So, our admiration and thanks to the team in Christchurch for continuing to move the science forward in the studying of unbelievable catastrophe that is afflicted region.
So, this trial should finish up in a summer given those predictions and once the data goes through its stripping process, and data analysis we should be able to report the results again as planned sometime in third quarter, but again, it depends (inaudible) enrollment and data analysis process. But on track to that so far no unusual safety signals or problems in the sub-blinded study, and we are very excited to see what the data it has to reveal.
So, good progress on three fronts, the GnRH program with elagolix and Abbott, but we met two program here in Urocortin and the Urocortin 2 program with the colleagues at Christchurch, New Zealand in the acute to competitive patients.
I think at this point I will pause and I turn it back to Kevin and I look forward to your questions in few minutes. Thanks.
Thanks Chris. So, as you heard from Chris we did have an extremely good end of Phase II meeting. The agency remains very engaged and they continue to communicate very well, very clearly with us. And as Chris said it was a real pleasure to see that the collegial atmosphere, clarity of communication was retained now that Abbott is actually the leader in this program with the agency. I’d also like to say that Abbott did an outstanding job in preparation for this meeting which is one of the prime reasons why it went so well. It was extensive document that Abbott prepared, I thought they are in questions that they posed to the agency was spot on. It led to very good discussion which we anticipate that as Abbott continues to work with the agency in finalizing the protocols, will lead to real good agreements there, but as Chris also said, we came out of that meeting with broad agreements on virtually every aspect of the clinical and pre-clinical program, and moving forward.
So, at this point in time, I’d like to open it up for your questions.
(Operator Instructions) We will take our first question from Jon Lecroy with Hapoalim Securities. Please go ahead.
Jon Lecroy - Hapoalim Securities
My first question is what doses are you using in the Phase III endometriosis trials and then also in the Phase II Fibroid trial?
So, as you know in the Phase II program the dose that we had in 901 study was 150 milligrams once-daily and that will also be used in the Phase III trials. We do have some options potentially adding a second dose arm in some of the Phase III work is under review right now, but the main dose is 150 milligram dose. We have not discussed the Phase II Uterine Fibroid dosing publicly and this is up to Abbott obviously it will keep posted on ClinicalTrials.gov when we get there, but I think in general terms you can say that we certainly have a ranging of and understanding of the range of doses that are associated with modulation of estrogen and other biomarkers. This first Uterine Fibroid study is expected to be a study that explores a range of doses and this would give us some idea of whether same doses necessary for Uterine Fibroids were used with endometriosis or we need to explore more broadly. The population of patients with Uterine Fibroids tend to be older than women with endometriosis. So, in contrast to the 30 year old endometriosis suffer, the Uterine Fibroids subject that might be a candidate for elagolix to quickly in their early to mid-40s. And this may have some impact on dosing as well as the extent of suppression of (inaudible) necessary to reduce the urine bleeding that is typically the primary end point in these trial. So, that work will be coming along and you will hear more about that in [separate reports].
Jon Lecroy - Hapoalim Securities
And then can you talk a little bit about the responder analyses versus maybe what other kind of end point you could have used and why that’s advantage?
In the 901 study when we reported the results you may recall that we reported a co-primary end points in two ways; we talked about a mean change from base line. So, we compared the change course in the placebo and elagolix group. And we also reported the proportion of women that were responders as judged by specific amount of change in their co-primary end point scales. And so for example you remember the critical piece there if the 901 data was that we had about twice as many responders in the elagolix group as we did in the placebo group and using in that case in the 901 data we have a threshold for the responder definition that was at least a 30% reduction in chronic non-menstrual pelvic pain for example. And so that’s the kind of responder analyses which we have in discussing with the FDA. We like responder analyses because they are clinically very understandable. When you talk about a mean change score of 1.2 on a scale that’s something that’s often hard to get your hands around as a clinician, but when you say twice as many women were responders and had to clinical meaningful improvement in their pain, that’s something that’s very easy to understand and I think this particular division has always appreciated that responder analyses is able to convey that kind of information. So, that is an advantage either method either mean change from base line or a responder analyses is a statistical assessment that works. I mean we can do the minor way, there is no significant difference in sample size needs or a power in these kinds of studies that we are doing, but from the clinical interpretation and communication, our responder analyses is a powerful method.
We will take our next question from Jason Napodano with Zacks. Please go ahead.
Jason Napodano - Zacks Investment Research
When you look at what Lupron cost for three months, I think it's around $200,000 or so per shot that would suggest to me some pretty strong pricing power for elagolix. Obviously, it's early to start talking about price, but I’m wondering if that has conducted any pricing studies or any market research studies that you can share with us.
Yes, Abbotts’ marketing group has been fully engaged in this they have began quite a few market research studies, whole initiative around this, but you were right when you started out, it's premature to talk about pricing here. It's the first thing class therapy and so Abbott will be going through at the appropriate times both with physicians and then with payors and doing their pricing work.
Jason Napodano - Zacks Investment Research
And the way Lupron is prescribed it's not recommended for more than six months. Do you see a similar six months on three months off dosing for elagolix in the real world setting?
Lupron can’t be used for more than two six months settings because of the black box warning associated with the bone loss. As you know from the data that we have generated throughout our Phase II program we have minimal if any bone loss at the 150 milligram dose. So, part and parcel of the Phase III trials are going to be around length and duration of dosing with this drug. To try a distinction though I think as we said all long, we don’t look at Lupron as being a competitor in this marketplace. It is so sparsely used within endometriosis that it hardly hits the patient population at all. Obviously, the goal here for elagolix and everything that we have done to with the judge suggest that this will have broad adoption throughout the endometriosis population.
(Operator Instructions) We will take our next question from Nick Bishop with Cowen & Company. Please go ahead.
Nick Bishop - Cowen & Company
First I had a couple of questions about the Phase III elagolix design. First, can you compare in contrast for us what you know so far about the primary and any secondary endpoints in Phase III as compared to the daily [patent] trial? Second, can you give us any ballpark of the number of patients we should be thinking about, is it sort of low 1000s high 1000s more than that. And finally, how long the trial likely to last and when do you think we might see data?
In reverse order, we said throughout our discussions about the Phase III program that Phase III trials will contribute a large number to the NDAs safety population. So, to meet ICH guidelines, these are big studies, they are many hundreds of subjects, the exact final number is something that’s still being discussed between Abbott and the FDA and it will be locked in place obviously before the trial start later this year. But large numbers somewhere in the range of many 100s to 1000s would be a reasonable estimate. Of course, there will be two pivotal trials to meet FDA guidelines and for this primary registration trials we are talking about two six month placebo control trials with some additional detail to follow once those are finalized. There was a third part of your question.
Nick Bishop - Cowen & Company
Yes, but how long you think the trial will take to complete.
So, that will an interesting question and that feasibility work has been looked at right now by Abbott. But you can imagine that with hundreds of centers in U.S. and outside of the U.S. And six month of treatment duration, you are probably looking at a two year window from pulling the trigger and starting the trials to 12 to 18 months of recruitment and running the trials and then final close out and wrap up of the data. So, somewhere in that time window is a reasonable estimate. Obviously, that’s an estimate this is something that given the magnitude of these studies, no ones ever done by such large endometriosis trials as part of the Phase III program before. So, this will be a learning opportunity for both Abbott and Neurocrine, and we will get a better handle that is once the trials are up and running.
Nick Bishop - Cowen & Company
And then one other question on the Phase III elagolix development. Do you have any clarity at this stage of what the plans are in Europe and will the current Phase III trials will be potentially supportive of the filing there?
So, Abbott is intensely working on European side, obviously interested in this being a global initiative for elagolix, and as many countries is appropriate. The details of what Europe needs remain to be worked out. One thing you can say is obviously the U.S. trials will be supportive of European initiative. The main difference of course is typically the EMA requires, they don’t like placebo controlled trials as their registration trials. They typically like active comparative trials and there is a process where a sponsor in this case Abbott would engage in European countries and EMEA and discussion through scientific advice while they work out those details. That’s obviously something that’s going on in parallel with the primary U.S. initiative.
Nick Bishop - Cowen & Company
Just one last quick one if I could. On the Phase II Fibroids trial can you give any guidance on about how long that trials likely to last and when we might see some results?
I think Abbott will come out with the details of the trials as the protocols, get finalized and you would expect to see them posted on ClinicalTrials.gov once we get their, I think in a general sense, however, it's fair to say that these trials are earl Phase II studies typically are in the three month range and there moderate size Phase II studies. So, if we start this year this is something that we would hope to be able to complete this trials in a year's timeframe, but I really can’t give or speak to details on that. Since, it's an Abbott initiatives.
Well, thank you very much for your attention this morning, this is got all the time that we have this morning. As you can see it really has been a very good quarter for us, yet again there is a lot going on at Neurocrine, both in these programs that we have spoke about and in outliers. And in closing I’d just like to say that the end of Phase II meeting really was a demarcation in the elagolix program. This is where there was a true handing off of the program and Abbott truly taking the lead of this a fully engaged partner putting all of its resources towards this program. We are working closely with them to assist them in any way that we can as we move forward as you know, it's a deep collaboration that we have with them. But our partners truly has taken ownership of this program and I can’t be happy with the way that they are conducting the program at this time.
On a final note, Tim and I are in Boston with the Deutsche Bank conference today and I will be speaking from the podium at approximately 10:40 a.m. So, that we can go over something’s east coast time, 10:40 a.m. So, we can go over something’s that maybe we didn’t touch upon at this call. Once again thank you very much for your attention. We look forward to talking to you all in the future. Bye-bye.
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