Kevin Gorman - President & CEO
Ravi Mehrortra - Credit Suisse
Neurocrine Biosciences Inc. (NBIX) Credit Suisse Annual Health Care Conference November 9, 2011 4:00 PM ET
Ravi Mehrortra - Credit Suisse
Good afternoon everybody. It gives me great pleasure to introduce President and CEO of Neurocrine Biosciences, Kevin Gorman. The break out room after this will be in the Canyon Room. Kevin?
Thank you very much, Ravi, and I would like to thank Credit Suisse for the opportunity to seek here today. Before I get started I just like to put up our Safe Harbor statement because I will be making forward-looking statements today.
Neurocrine Biosciences has a very diverse pipeline within neurological and endocrine based diseases. We have a late stage program that’s partnered with Abbot the center in Phase III in Endometriosis and is in a large Phase II trial for uterine fibroids. I will be speaking about that in just a little bit. In addition, we wholly own our unique VMAT2 program for Tardive Dyskinesia and other movement disorders, and I will be speaking about that also. We also have a late stage program Urocortin-2 that we hope to be reporting out Phase IIb data in Acute Congestive Heart Failure in the coming weeks.
In addition, we have a very strong financial position within Neurocrine. We started the deal with $135 million in cash, we'll end the year with $130 million in cash. So while pushing forward programs, we have a net burn of approximate $5 million and that’s due to the royalties that come in from -- not royalties but the milestones are coming from Abbot. Last quarter, we pulled in $30 million of milestones from Abbot.
We have no debt in the company, a very controlled burn rate as I just said, and 55 million shares outstanding with a very strong shareholder base and we have approximately 80% of institutional ownership. So, we have this diverse pipeline. In addition to what I just mentioned, we usually have on working five to eight different components that are in research of preclinical development in number of neurologic indications. We don’t talk about those until they reach the clinic, but a very active and productive research and development group.
Now, let’s turn our attention to Elagolix, a lead program. Gonadotropin-Releasing Hormone Antagonist, it’s a small molecule, it’s orally active. And it really gives a first-in-class opportunity for Endometriosis. It has a number of attributes that are very meaningful attributes. Any one of these could be a tremendous differentiator for the product. Altogether these are going to change the standard of care for endometriosis in the future.
And one of the very attractive aspects of this program in what we try to build into each program that we take on and invest in is that there is some entire pipeline just within this program. One of the reasons why we chose Abbott Pharmaceuticals as our partner, is they were dedicated to simultaneously develop this product into two indications, both Endometriosis and Uterine Fibroid.
I put up three more indications where you absolutely know that modulation of the GnRH receptor is involved in emulative of the diseases. There is actually at least a dozen diseases like disorders that are in addition to these, that you know that for a fact.
And then we have our follow-on program, which we hope to bring it, one of the follow-on compounds up into the clinic next year.
Now turning to Endometriosis. This is a disease that affects approximately 10% of all women of childbearing age in the United States. There is a tremendous need here for a therapeutic. This is a disabling disease. It’s characterized by intense pain and by bleeding. If affects not only the women, who is stricken with the disease, it affects their entire family and social structure.
The current activities that we have going on with Abbott and we stand in support of Abbott of these activities, is that Abbott is finalizing the Phase 3 protocols for the endometriosis trial with the FDA. The endpoints are set. They are the ones that in collaboration with the FDA that we had determined non-menstrual pelvic pain and dysmenorrhea, which is pelvic pain during menstruation. The statistical methods are going to be a RESPONDER analysis as we had done in various successful Phase 2 program. And then trial designed for Phase 3 broadly is that there will be two nearly identical trials 800 patients in each trial. They will be six months in duration. And then there will be a safety expansion of an additional six months, which will take our patients continuously treated for one year. Together with Abbott, we have qualified over 300 clinic sites in North America to-date.
Turning our attention now though to Uterine Fibroids. Here is a disease in which there are benign tumors that are growing in the muscle and connective issue of the uterine wall, these are called leiomyomas. Interestingly, these have very similar symptomatology, as far as the patient is considered two endometriosis, severe pain, but even more than endometriosis a vast amount of bleeding that takes place throughout the month but, especially during there menses. If you look at endometriosis and uterine fibroids, they account for the vast majority of infertility in the United States. So, these are endometriosis hits primarily young women starting in their teen. The average age in our clinical trials endometriosis trials is about 31-years-old. With uterine fibroids, the average age of these patients is a bit older it’s about a decade older and they are in there 40s. But in either case, you are hitting woman in the prime of their life; these are diseases of the elderly.
Now, again uterine fibroids is very similar to endometriosis and that there are few pharmacological options available to these woman. And the one that are all available to them have either very limited efficacy such as the oral contraceptives, or over-the-counter NSAIDS, even the Opioids, which they go on to try to deal with the pain, are not effective or the sideeffects of the effective treatments, such as the GnRH Depot, such as Lupron, their sideeffects are intolerable. Women chose to suffer with the disease rather than the sideeffects that they have from the drug. And you can only use Lupron one year out of a women’s life because of the tremendous bone loss that’s associated with it, yet it’s a disease that strikes in the teens and goes all the way until menopause.
Ask them when you look beyond pharmacological treatments, now you are in the surgical treatment. So very invasive that you need to go into an endometriosis it’s a laparoscopy and try to pinpoint the lesions and remove them in uterine fibroids. Again, it’s a surgery where you go in and do multiple different ways; try to remove perhaps the largest myomas that exist. In each case, off time the ultimate surgery is taken and that is a hysterectomy.
And, as you can see here endometriosis in this is a bit dated. So it’s probably closer, well over these numbers of 125,000 hysterectomies per year due to endometriosis and over a quarter million hysterectomies due to uterine fibroids. The goal that we have with this program is to offer women who suffer from this disease and their OBGYN care givers a pharmacological option such that its well tolerated, it's highly effective and we can get rid of this necessity for the hysterectomies.
Now, as with all of our programs we do, these are novel chemical entities that are discovered at Neurocrine. We patent them worldwide with six issuing patents covering Elagolix and a huge patent at stake. We've made over 9000 active molecules against the GnRH up to to-date. The composition and matter, patent expires in 2024 and that doesn’t include the extension of approximately five years. Keeping with the schedule that the team has right now we will have 14 years of exclusivity which is the maximum allowed by law at the launch of this product.
So turning our attention now to our wholly-owned program of VMAT2, and VMAT2 means Vesicular Monoamine Transporter 2 and this again is a program that is reminiscent of how we approach our drug discovery and development in that it is again a program where targeting a receptor that will have multiple different therapeutic conditions that we can treat with it a wide variety of movement disorders can be treated via VMAT2 inhibitor. We are starting out with Tardive Dyskinesia. Now that is the irreversible movement disorder that’s caused by antipsychotic drugs. So these are individuals who have schizophrenia who have bipolar disease and have major depression treated with anti-psychotics and they develop this irreversible abnormal muscle movement.
In addition, it can be used for Tourette's Syndrome; it can be used for the chorea, associated with Huntington's chorea. And interestingly enough, it would be the only potentially pre-synaptic treatment of schizophrenia. All of the other dopamine regulators and modulators that exit out there be typical or atypical anti-psychotics all treats schizophrenia by acting post-synoptically at one or more of the dopamine receptors.
So what are the players that are involved here? It is the biology. Here you're seeing the cartoon of a normal synapse taking place. On the post-synaptic receptor neuron you see that the dopamine receptors. Presynaptically you see the dopamine transporter and then you see these vesicles and embedded in these vesicles are VMAT2. VMAT2 is responsible for bringing dopamine with synthesized endo cytoplasm into these vesicles and then these vesicles fuse with the synaptic membrane and are released into the synapse. That is a normal situation for adjusting with VMAT2. The dopamine that is in the cytoplasm that is not encapsulated in these vesicles will be degraded at that point, actually fairly rapidly.
In Tardive Dyskinesia the entire system is hyper regulated. As I said before this has applicability in Tardive Dyskinesia, which is a disease caused by pharmaceuticals. It has a -- it would have efficacy in Huntington’s chorea, the chorea associated with Huntington’s disease, there you have a genetic disorder and Tourette, which is unknown. But all three of them share the common feature of a hyper dopaminergic system.
And so you see here that there is excessive dopamine in the presynaptic terminal, there is and there is much of that is being encapsulated and released into the synaptic space and there is an enough regulation of the dopamine receptors. So, a very high hyper and dopaminergic system, with hyper receptor sensitivity.
What we have developed, our small molecule from the lead here is NBI-98854, which is an allosteric inhibitor of this protein VMAT2 that are shown in the space-filling molecule. And the goal of this program is to not completely inhibit VMAT2, but to downregulate VMAT2, such that you go from this hyper dopaminergic system down to a more normal dopaminergic tone. So you are now lowering the amount not abolishing the amount by any stretch of the imagination, but lowering the amount of dopamine, that’s available in the synaptic cleft.
Now we embarked on a Phase I program under a CPA in Canada in normal healthy volunteers, we did two Phase I trials found the drug to be safe and well tolerated in those healthy volunteers. We then embarked on a small Phase IIa trial up in Canada as we do with all of our programs. We brought together six in one site we had six schizophrenia patients, stable schizophrenia patients who had Tardive Dyskinesia. We treated them for 12 days starting four days of 12.5 milligrams moving up to immediately four days at 25mg and four days at 50 milligrams. And there was no placebo here. This is done for us to understand, the patient population understand doing one of these trials, if you will, get in our feet wet with that and understanding the primary endpoint, which is utilizing the Abnormal Involuntary Movement Scale or the AIMS scale. We also looked at a brief psychiatric rating scale to make sure that we weren’t having an adverse effect on their underlying disease, which is Schizophrenia. Even though by mechanism, we should have a positive effect on it. And then we evaluate it pharmacokinetics. Again there is no P-value; so there is no placebo here. So you have to be careful about how much you can interpret from a small trial like this.
A bit on the AIMS scale. This is a clinician related scale. It’s been around for about 35 years now; it’s a well-accepted scale. It looks at involuntary movements over the entire body; three of them are facial and oral, another one dealing with extremity movements one for arms, one for legs, and then finally one for the trunk movement. It’s a zero to four scale on each one of those body reach.
And what we found, was at baseline these patients were approximately 14.3 on the scale. These are moderate to sever suffers of tardive dyskinesia. After only 12 days of treatment we saw a 40% reduction in the AIMS. They went down to an 8.4, down into very much the mild region of this. The investigator who was running this trial has run virtually every jug that has been tried in tardive dyskinesia. There are none available and he has never seen a response this high.
There was when they were taken off drug and you looked at them a week later now the TD as expected is coming back they are up to about 13 again. This was very encouraging to us, when if there is no placebo here. So you can’t draw too many conclusions when other drugs that have failed have been put a placebo control trial in tardive dyskinesia the placebo rates are anywhere from 10% to 20% or less. So at 40% gives one a good feeling that you are having a real effect on this.
This initial Phase II study showed us that the drug was safe and well tolerated up to 50 milligrams per day. The PK was just as we expected and they had, we found that the BPRS score, their Brief Psychiatric Rating Score stayed stable or actually improved slightly, but there is nothing you can really say about that with such a small.
We do note that there is one serious adverse event in the small trial. That was a patient whose main involuntary movement was a trunk movement that he had for several years that made it very difficult for him to breath. During the study, that went away, abated due to the drug; he could finally breathe easily for two weeks, but unfortunately a week after being off drug it came back. The patient was very distressed by that and had to be hospitalized because of the emotional distress of that. Again, those things why do we do these small trials? It teaches us a thing. These patients have to be very well informed that when they come off of drug the benefit that they see is going to leave, and these are emotionally fragile patients and we need to offer them as much support as possible. So that’s one very good learning that we got from this study.
Now, we have embarked now approximately four weeks ago on a second Phase II trial now. We opened the IND in the United States. This is a Phase IIb study. This is a double-blind, placebo controlled, cross-over trial. There are 32 patients in this study, and they are getting once daily treatment of 98854, either 12.5 mg or 50 mg. We are still doing only a two-week dosing period, because that’s all the animal toxicology that we have. Our clinical program has out run our preclinical program. The three-month animal toxicology program in dogs and rodents is going to be complete next month. So, for now, we are with a two-week treatment timeframe. We are using the aim scale yet again, and this is a within subject comparison for safety and efficacy.
This trial, as I said, started last month; it will report out early in first quarter of next year. And this is just a diagram of this. Again, patients are either started on placebo and move them after two weeks into dosing with the drug for two weeks or they are started on drug and then move into placebo. This is powered for a p value.
So, in 2011 as I said, we held a pre-IND meeting, a very successful one with the Division of Psychiatry at the FDA. But we started this started, we are finishing up our three month toxicology program. And, if this study gives us the results that we anticipate and that the three month tox on the compound is clean then we plan on starting two large Phase IIb trials next year in tardive dyskinesia, one of which we will read out next year. And then, we are going to explore a second indication that we will start a phase II proof-of-concept study in next year. So, while an early stage program as we speak here today it rapidly becomes a late stage program in the coming year.
As I said, with all of our programs, this is a new chemical entity. We received notification of allowance on the Composition of Matter patent on it this year and the expiration of this Composition of Matter patent is 2029 with Hatch/Waxman list into 2034, and we are pursuing the other patents on this worldwide currently.
And as I said, we are in a very good cash position with a very controlled burn. We reported that we ended third quarter with $140 million in cash investments and receivables.
So with that, I think now I thank you for your interest and we are meeting in Canyon for a break out session for any additional questions. Thank you very much.