Kevin Gorman - President & CEO
Jane Sorenson - IR
Tim Coughlin - VP & CFO
Chris O'Brien - CMO
Thomas Wei - Jefferies
Ian Somaiya - Piper Jaffray
Neurocrine Biosciences Inc. (NBIX) Q1 2012 Earnings Call May 2, 2012 5:00 PM ET
Good day everyone and welcome to Neurocrine Biosciences reports first quarter 2012 results. At this time all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the Q&A session. (Operator Instructions). It is now my pleasure to turn the conference over to Kevin Gorman, President and CEO of Neurocrine Biosciences. Please go ahead sir.
Thank you and good afternoon everyone. Welcome to our call. Today I am joined by Chris O'Brien, our Chief Medical Officer and Tim Coughlin our Chief Financial Officer. Before we get started I would like to have Jane Sorenson to read our Safe Harbor statement.
Good afternoon. I want to remind you of Neurocrine’s Safe Harbor cautions. Certain statements made in the course of this conference call that state the company's or management's intentions, hopes, believes, 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. We've had a real productive first quarter here at Neurocrine particularly in the VMAT program and everything moving forward with the Elagolix program. We’ve also hit our numbers right on spot for guidance that we gave at the beginning of the year. So what we will do today is Tim will take you through our financials in more detail and Chris can give you a brief update on each of the programs.
And then I would like to turn it over to the rest of you to answer any other questions that you may have. So without further ado Tim.
Thank you, Kevin and good afternoon everyone. Today we released our financial results for the first quarter of 2012. We again met our financial plan for the quarter losing a penny per common share outstanding.
This compares to $0.05 of income per share for the first quarter of 2011. The main differences in this managed results from quarter to quarter are lower income realized under the Abbott collaboration coupled with higher research and development costs primarily related to our VMAT2 Program.
We remain on target for an annualized cash burn from operations of $40 to $45 million consistent with the guidance we provide at the beginning of this year. Revenues for the first quarter 2012 were $11.3 million compared to $12.5 million for the first quarter of 2011.
The decrease in revenue is attributable to clinical and pre-clinical efforts around Elagolix which continue to tread through to Abbott. We expect revenue recognized under this collaboration agreement, both Abbott and BI to continue to decline throughout the year.
Research and development expenses increased quarter over quarter. The main driver of this increase is activity in our VMAT2 program which continues to move forward in Phase II studies as well as drug product manufacturing, drug packaging for future clinical studies and a battery of pre-clinical work to support longer-term dosing in the ultimate NDA filings.
Additionally utilization of external experts and external (inaudible) studies for some of our early research programs also contributed to the increase in R&D expense. Personnel expense from both the R&D and G&A expense lines increased from 2011 to 2012. The main driver of this increase was higher non-cash stock based compensation costs related to options created during 2011 and 2012.
Stock based compensation expense increased approximately $700,000 companywide quarter-over-quarter. $300,000 of this increase was in research and development expense and $400,000 was reflected in general administrative expense. The company continues to believe that options are an extremely effective mechanism to align employee and shareholder interests. Overall for the quarter, expenses were in line with our expectations and budget.
We expect research and development expenses to increase as the year progresses and general and administrative expenses to remain relatively flat through the year. We began 2012 with approximately $132 million in cash investments or receivables. In January, we replaced 10.9 million shares of stock with high quality investors and yielded $83 million in net proceeds to the company.
The funds raised from the offering were offset by cash burned from operations of approximately $11 million in the first quarter yielding approximately $203 million in cash investments or receivables at March 31, 2012. That concludes our prepared remarks and the financials. For those looking for more information, our 10-Q is on file with the SEC and with that I will turn it back over to Kevin and Chris.
Thanks Tim. And as you can see we are in a strong financial position right now and as always we are going to stay very vigilant on our burn going forward. Chris, how about a brief update on the programs.
Thanks Kevin and good afternoon to the listeners on the call. With our Elagolix program and the collaboration with Abbott, we are very pleased with the progress that's been particularly in recent weeks. Abbott conducted a very successful investigator meeting which is the kickoff for the Phase III endometriosis program and as they've announced, they expect to be screening subjects for the Phase III endometriosis trial within the next few weeks. So a very good progress on what is going to be a very large study. Details on the study and the study design ultimately will be available on clinicaltrials.gov. Abbott is also continuing to remain on track and we are recruiting through their uterine fibroids Phase II program and that study is going to plan and we look forward to some updates on later this year as they previously stated.
In house our efforts are obviously focused intensely on VMAT2 program. As you know from our last conference call and press release we had data from our 1101 Phase II trial with our study drug 854 for patients with moderate to severe tardive dyskinesia. That trial provided us data that allowed us to see that we have achieved proof of context particularly with the 50 milligram dose and the data from that trial has allowed us to move forward toward the next Phase II study and we just had a very good discussion with the FDA with respect to our preclinical program and the data that we have been generating. This data is now sufficient to support the planned long-term Phase II trial that we have been talking about.
And so we are very pleased with our interactions with the FDA in that respect. We are using the data from the Phase II 1101 study to help us with refinements to protocol design and dose selection and we are on track to start the 12-week trial in patients with the moderate to severe tardive dyskinesia and these are schizophrenia patients or those with schizoid effective disorder. We hope to start the trial in July; mid-summer as previously discussed and look forward to telling you about the conduct of that trial as we go along. That's the VMAT2 program.
Literally as we are speaking this week, we’re just getting some information from the cardiologists in New Zealand with the availability of some preliminary data this week and we look forward to being able to summarize this information for people next week once we get all the data and get our hands around the summary. So that's the update Elagolix would have it for endometriosis and uterine fibroids, VMAT2 on track, good meeting with FDA about to start the large Phase II tardive dyskinesia study and (inaudible) data coming next 30 days.
Thanks Chris. What I would like to do now is focus to questions at this point.
(Operator Instructions) Our first question comes from Thomas Wei with Jefferies. Please go ahead.
Thomas Wei - Jefferies
I just wanted to confirm that there actually is an official signed SPA between Abbott and the FDA for endometriosis.
So Abbott has had an SPA that, as you know they submitted. They are starting their phase 3 trial currently without a signature on that document but they had completed their discussions so that they are satisfied in order to go ahead. I think as far as details about their plans for those kinds of FDA activities, you need to ask Abbott for actual details since it’s not in our regulatory purview right now.
Thomas Wei - Jefferies
So is your understanding that there, that the plan is to formulize that into an actual SPA agreement.
I mean that has been the plan. I just can't tell you anything about the status of that other than that the protocol is final and the study is starting.
Thomas Wei - Jefferies
And the fibroids trial is that still on track for data in the third quarter?
I think that Abbott has already said by end of year, I don't know as I have never seen any quarter announcements but absolutely the study is on track, their recruiting is going very nicely and the conduct of the study is going quite well.
Thomas Wei - Jefferies
And then for VMAT2, have you had any additional thoughts on [rejudicating] the data in different ways either to look at entire set of data yourself and use the videos to rescore the whole lot of patients or to even submit the whole set of data to an independent reader to do not.
Yes as we mentioned on the prior call, we have announced and external independent rater reviewing all the videos and that information will be, I think useful to us as we think about training methods and video taping methods in our future trials.
Thomas Wei - Jefferies
And when do you think you would have an update for us on what the rescore data looks like with the independent reader’s reading.
The reading -- the video reviews, there are hundreds of them. So that’s still going on. I don’t know whether we have ever said anything specifically about a date or reporting this information. I think my comment on the last call was we’re going to try to get the most out of this information for going forward but because we had gotten what we needed mainly proof of reasonable effect from the 50 milligram dose, we wouldn’t necessary anticipate reporting out this outside read. Just to make clear a point that I hope I made last time. There is a difference between a video rating of a video tape exam versus a clinician’s doing the rating and what we are learning is that the quality of video is variable and we are getting our hands around that so that we have a much improved 12 week study going forward. So if there is something interesting from the independent rater, I’d be happy to talk about it. I just don’t have any timeline or specific details to offer on that and clearly that won’t change our past going forward, just refine what we do in the next study.
Our next question comes from Ian Somaiya with Piper Jaffray. Please go ahead.
Ian Somaiya - Piper Jaffray
Thanks, just a question on the uterine fibroid Phase II study. Can you just walk us through the design of the study, you know what should give us confidence in a positive outcome and ultimately you know what you had hope to learn from this trial and what are the likely next steps. Are you looking potentially at a Phase III program next year in uterine fibroids or are there other intermediate steps that starting to be taken?
So let me preface my comment by saying that we’re not the uterine fibroid experts. Obviously that’s why we partnered with Abbott. So my facility was UF compared to endometriosis is a little bit less. On having said, that the Phase II study that Abbott is running in a proof of concept study that was designed to look at a range of doses in a series of sequential cohorts and allow them to make decisions about what studies come next. I mean, do you need another Phase II study. Do you go right to Phase III? Those are kinds of things that it’s my understanding at least that Abbott plans to get out of this current study.
Now you asked an interesting question. You said what people expect to see in terms of efficacy and the basis for a Phase II uterine fibroid study. We know from the endometriosis population that a range of (inaudible) doses have a marked effect on reducing uterine bleeding. Now of course, these are women with endometrioses but we also see this with healthy volunteers with the reduction of normal menstrual activity.
So the expectation is because of the re-targeted [gene-rich] effects on progesterone and estrogen that it will be a reduction in uterine bleeding in women who are enrolled because they have very heavy uterine bleeding due to fibroids. So the expectation is they will have a marked reduction in uterine bleeding. And I think that’s an easy one. I don’t think there is any uncertainty that you will be able to see a reduction in uterine bleeding. Real interesting question is which is the best dose that’s still part of this process and gets on.
Ian Somaiya - Piper Jaffray
And then I know you are recording two data, could you remind us what the end point is there and give us some sense of what possible next steps could be?
The study is at the Cardioendocrine Group in Christchurch New Zealand was running. They called it a pilot study for Acute Decompensated Heart Failure Patients. Their primary focus, Dr. Richard and the team there has been in neuroendocrine hormonal aspects of Acute Decompensated Heart Failure.
In this trial they measured a lot of things. They measured a whole range of hormone levels. They had a subset of 20 subjects who underwent light heart catheterization, looking at cardiac health plug and pulmonary wedge pressure. They measured patient symptoms and [dysmea] as well as whole range of clinical chemistries, hematology and other vital signs.
And so the way they wrote the protocol, they did not pre-specify a primary endpoint. They called it a pilot study the first time this ADHF population was studied and so they are going to report out on a whole range of things as I mentioned hemodynamics and neuroendocrine values and other factors.
So Phil also then the answer going forward, you know this is not a core program for us; hasn’t been for number of years, so we are not going to have any more on this program depending on what the data looks like, we’ll put the requisite amount of effort in the looking for a partner for this data. So as we get it, we will share it with those companies which have shown an interest and wanting to hear about it and then we’ll see where it goes from there.
And one more thing Phil just to be clear, the study is a randomized placebo controlled trial, so the 50 patients that were randomized, were randomized either standard of care plus at four hour placebo infusion or standard of care plus a four hour you urocortin infusion and they are all followed for a total of 24 hours. So that's the date we will be able to report out as soon as we start doing it.
(Operator Instructions) We will go next to Robyn Karnauskas with Deutsche Bank. Please go ahead.
Hey guys (inaudible) congrats on the progress of Elagolix and VMAT during the quarter. Just two questions if I could by any chance. One, just kind of wanted your perspective on Watson’s Esmya that’s moved in Phase III and kind of how your proposition is diverse from that?
And then the kind of second quick follow-on would be, have you had any evolution on what you are thinking about specifically and like kind of the phase, the design, the redesign of VMAT a little bit like anything from just initial thoughts you had and the assessment that you've made beyond what you were saying initially and overall?
As far as the selective progesterone receptor modulator that you are talking about, sorry, you said Esmya, so for uterine fibroids and the Elagolix program, I don't have enough detail really to speak to that. It’s my understanding that the trials that were done to get the progesterone approved in Europe are not at all similar to the trials that the FDA would require here in US for the drug to be approved.
In particular, chronic long-term use of unopposed estrogen therapy like this progesterone will require a lot of long-term safety data, endometrial biopsies and excessive efforts that I don’t think our partners of that trial that you are referring to. So and I also understand that there is no patent protection for that drug here in the US; I am really not sure what the future of that is, but that would probably be good question to ask to the Abbott or Abbott colleagues since it’s their area of expertise.
Now, as far as the learnings from the VMAT program. So I think you heard my comments a couple a minutes ago about using the data from 1101 study, but I can tell you what is perhaps even more important from what we are focused on today is the design and the conduct of the 1201 trial which is the internal numbers that we have for the 12 week study that’s coming up. And, we are very focused aspects of who they AIMS examination is conducted, scored and monitor. So if you are interested I’ll provide a few details about the study.
So one thing we are using an external independent expert to assess whether the subject qualifies for this study. So the patients, the severity of the patients Tardive Dyskinesia is going to be qualified as begin moderate to severe or not by an independent expert external reviewer.
The investigator, at the investigator site, we will have two; one the individual who interacts with a patient, with a subject, finds about how they are doing, conducts the safety assessments, hears about the adverse events etcetera; reviews the clinical laboratories, the ECGs and etcetera. So that’s the treating investigator.
We will have a separate independent rating investigator that is not responsible for patient or a subject interactions otherwise and this is the way of helping to keep some of the objectivity and reduce some of the entity bonding that sometimes deters, that sometimes contributes to placebo effects.
So we have an external reviewer that qualifies the subject as having moderate to severe then at the site we have the treating investigator and we have the site based independent rater who conducts the AIMS exam.
Furthermore, the AIMS exams are videoed and we have a quality process that reviews the videos and make sure that the AIMS exam videos have been conducted properly through the contact of the study. So whole series of quality controls that we are building in to make sure that we don’t have any difficulties through that time.
Thank you (Operator Instructions) It appears we have no further questions at this time, I like to turn it back to Kevin Gorman for any closing remarks.
Well, thank you all very much. We appreciate your attention. We appreciate your questions. So in summary, with finance healthy balance sheet that we are going to protect, we’re kind of using that push our portfolio programs forward quickly in particular VMAT2 program and add to our pipeline. As we receive information from Abbott on the Elagolix program both for endometriosis and for uterine fibroids, we will be passing that information on to you as time goes on.
So once again, thank you very much and as always, we look forward to getting together with each of you at upcoming meetings and also we are available here to discuss further. Thank you very much and have a good afternoon.
This concludes today’s program. We do appreciate your participation. You may disconnect at any time and have a great day.
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