Earnings Labs

Neurocrine Biosciences, Inc. (NBIX)

Q2 2009 Earnings Call· Thu, Jul 30, 2009

$130.25

+1.66%

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Transcript

Operator

Operator

Good morning and welcome to Neurocrine Biosciences Second Quarter Earnings Call. At this time, all participants are in listen-only mode. (Operator instructions). Please note this call is being recorded. I would now like to turn the call over to President and CEO of Neurocrine Biosciences, Mr. Kevin Gorman.

Kevin Gorman

Management

Thank you very much, and welcome everyone this morning. I'm joined this morning by Chris O'Brien, our Chief Medical Officer; and Tim Coughlin, our CFO; and Jane Sorensen, Investor Relations. This morning what we are going to do is Tim is going to run you through the financials for the second quarter and year-to-date. And then, Chris will take you through an update on all of our clinical programs. Hopefully, you’ve had a chance to see our press release yesterday morning, where we gave the six months update to the 702 Lilac Petal Study. So Chris will be spending some time on that and then going on over the entire elagolix program. Before we get started, I would like to ask Jane to read our Safe Harbor statement please.

Jane Sorensen

Investor Relations

Good morning. 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, 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.

Kevin Gorman

Management

Thank you, Jane. Okay, Tim, if you can give us an update.

Tim Coughlin

CFO

Sure. Thanks Kevin and good morning to all from here in San Diego. Following up on our clinical news from yesterday morning, we released good financial results yesterday afternoon. The short story is that we aren’t planning from a financial standpoint in spite of the fact that we incurred a $3 million charge during the second quarter for our severance program. The company is implementing cost containment efforts throughout the organization and through these efforts; we were able to offset a good portion of this $3 million severance charge that remain on plan. I should also mention that the overwhelming majority of the cost for the recent severance has actually been paid to the impact the employees prior to the quarter end and that’s reflected in our cash and investment balance at June 30th. Our loss for the quarter was $0.39 per share, based on 39 million shares outstanding. For the same period last year, we had a loss of $0.55 per share. Our loss for the quarter was essentially what we had budgeted in spite of the severance charge. Our year-to-date loss is $0.90 per share compared to $1.10 per share last year, slightly higher than budget due to the first quarter expense related to the (inaudible) the front building and the $1.4 million charge related to the downgrade on the auction rate securities we hold with Citi. Our research and development and general and administrative expenses were in line with our expectations and down from the previous year. Overall, we will see these expense decreasing in the last two quarters of the year due to lower personnel cost and lower professional service cost. However, our external development expenses will rise slightly during the second half of 2009, due to the commencement of our carcinogenicity studies for elagolix and…

Kevin Gorman

Management

Thank you very much, Tim. As you can see, we continue to be in a very good financial condition. Right now, I would like to turn it over to Chris O'Brien, to take us through the clinical programs.

Chris O'Brien

Management

Thanks Kevin, and good morning to you on the call. Happy to talk about the progress we are making in our various clinical programs. So I will touch on elagolix, Urocortin 2, VMAT2, and Indiplon. Let me start out with the news for elagolix, as you are aware from our press release yesterday, we have completed the six-month portion of the Lilac Petal Study. We were happy to lock the database for this trial just two weeks ago and give you the preliminary look at the numbers in the press release. If you recall, the Lilac Petal Study was our fourth of five Phase II trials. This is the one we reported the primary endpoint which was comparison of elagolix to placebo at the Week 12 time point and we talked about that in March of this year. Obviously, the trial completed for the reminder of its six-month exposure. But you’ll recall that women who had been randomized to placebo were re-randomized in a double-blind fashion to one of two doses of elagolix, 150 milligrams and 250 milligrams once daily. Now the importance of the 250-milligram dose was that we had used our extensive dose response modeling based on PK/PD data from earlier trial to predict and select a dose that would help us understand what the upper end of the dose response continuum would be. As you know, with the 150-milligram dose, we had seen nice clinical efficacy and an excellent safety profile in our earlier Phase II study and of course through the Week 12 time point of the Lilac Petal Study. The 250-milligram dose was very comparable to the 150-milligram dose as it relates to AE, adverse event profile and clinical benefit. But we were most interested in seeing if we could find a – if you…

Kevin Gorman

Management

Thanks Chris. So that was a fairly detailed accounting of the six-month 702 study as we closed that down. So three Phase IIb’s each six months in duration, two of them completed and the results have been outstanding in both of them and right in line with our expectations for this drug. So now it’s is the – it’s the final one which is the 703 Study that’s – as Chris said is ongoing. So at this point, what I would like to do is open it up for questions.

Operator

Operator

Thank you. We will now begin our question-and-answer session. (Operator instructions). And our first question will come from Brian Abrahams at Oppenheimer & Company. Brian Abrahams - Oppenheimer & Company: Hi there, thanks very much for taking my question. I don’t know if there were some subtle differences in the BMD changes that you observed at six months with the 150 dose in Lilac Petal compared to what you saw in the Petal Study. And I am just wondering how meaningful in your mind are those differences if at all? And just given this variability, how reliable the (inaudible) regulators do you think their view of six months bone mineral density studies would be?

Chris O'Brien

Management

Thanks Brian. It is interesting. We are talking about variability. There is a variability in a DEXA scan and then for an individual subject which is significant. In fact, for a given individual subject, if you want to reassess the impact of an intervention sometimes for these kind of subtle changes of 1% level or 0.5%, you don’t even get a meaningful read until you go out for say, one to two years, because of the noise that’s around that. But in our case, we are talking about the variability of the mean for a group of subjects on the DEXA scan and in fact that’s why the FDA, we have looked at the lower bound of a confidence interval being minus 2.2% as the threshold that we’re interested in. So anything within that round, whether it’s minus 0.9% or minus 0.6%, those – that is just noise. It is the difference mostly likely between the population of one trial and the population for another. If you look at the range of change in BMD for individual subjects in our studies as well as Lupron or DMPA or others, you see that the range is actually incredibly broad. You see changes as much as minus 10% to plus 5% depending on if the woman is 42 years old or 21 years old, contaminate medications, if she’s a smoker, how heavy she is, some genetics. But the good news I think for us and one of the surprises to me is that if a woman entered our trial with osteopenia and keep in mind, we didn’t allow anybody in with the osteoporosis. But if somebody came in a T score of minus 1.4, they feared no better or no worse than anybody else in the trial. So the effects of elagolix were consistent regardless of the baseline BMD status of limit. So this is just noise. The mean value is what’s important from a regulatory point of view going forward. Brian Abrahams - Oppenheimer & Company: Got you. And then just a follow-up Chris, can you give us a sense of maybe some general scenario such that coming out of this meeting – this upcoming meeting with the FDA, you would feel comfortable moving straight into Phase III versus scenarios in what you think maybe an additional emerging [ph] study might be beneficial.

Chris O'Brien

Management

So in a general sense, if we come out of our discussions and the endpoints that the agency is truly interested in are ones that has clinical experience with, then we can – we don’t need any additional in part we can move straight away. And in my case, I would assume I would go with an SPA just to note down and then obviously we engage our partner with that process, because as Kevin has pointed out before, we don’t want to start a Phase III trial without the appropriate resources to complete the Phase III program. The – if after our discussions, we have clarity on the endpoints and there is some subtle changes to wording or whatever or if we come up with the way of handling the non-menstrual symptoms that I haven’t had clinical experience with, then I might want to do is small exploratory test of that modification and I can handle that in the timeframe that I’ve already outlined without delay of the plan for into Phase II and start as pivotals that I have already outlined. I have well over a 100 very good investigators in sites with a significant pressure of subjects that are interested in receiving elagolix, such that I could test out what – enough that I would need do power calculations for pivotals with any kind of change that the FDA would come up with, so looking forward to that. Obviously when we get clarity whether we are moving more rapidly to Phase III or testing that hypothesis and keeping on track to Phase III, I will let you know. Brian Abrahams - Oppenheimer & Company: Great. Thanks very much for the clarity.

Operator

Operator

We will take our next question from Phil Nadeau at Cowen & Company. Phil Nadeau - Cowen & Company: Good morning. Thanks for taking my questions. I also have a few questions on elagolix. First is on the 150-milligram dose. Could you let us know what the lower bound the 95% confidence interval was in the spine and femur there? I think that’s the last piece of data that we are looking for.

Chris O'Brien

Management

Let me find that in my notes here. Okay, this 150 spine lower bound was minus 1.6 at the Week 24. And then the femur is minus 1.4 at Week 24. Phil Nadeau - Cowen & Company: Great. And then, the second question is on adverse events. You mentioned the adverse events that were different versus placebo, but it sounds like those really led to discontinuation. So what were the predominant adverse events in the trial that led to discontinuation in the 150 milligram and 250-milligram doses?

Chris O'Brien

Management

I think there were one or two. I am sorry I don’t those in front of me. The most common, I think that two of them were the symptoms of endometriosis. Women had insufficient pain relief that they decided to go on get a contraindicated intervention or a hysterectomy or a surgery. We had – I apologize, I just didn’t bring those to have on hand. But what we did – I can tell you what they weren’t. The weren’t women who were suffering from excess suppression of estradiol, so we didn’t see hot flashes or lots of (inaudible) and some things that one would see with a menopausal state induced by GnRH agonist for example. And we – I am actually trying to think what else. I apologize, well, I just don’t have in front of me. Phil Nadeau - Cowen & Company: That’s helpful. No loss. Thanks for that. And then last question is on the two-year carcinogenicity studies, can you provide us some of those species you need, is it two (inaudible) species or do you need two primates or anything?

Chris O'Brien

Management

No primates. Phil Nadeau - Cowen & Company: Okay. And given that these are two-year studies and they are beginning now, is it safe to say that they’re probably as you could file for FDA approval elagolix would be sometime towards the end of 2011, is there anyway that you could file earlier than that without the two-year carcinogenic studies being completed?

Chris O'Brien

Management

No in fact the carcinogenicity studies are not being rate limiting element of the NDA submission. As I have mentioned, I think in the past, the expectation for an NCE like elagolix in a non-life threatening condition like endometriosis is that we fully conform to ICH guidance that we have two large efficacy pivotal trials that are six months in duration, plus some post treatment follow up and that will probably have a one year treatment safety data from the safety trial. And if these are all running concurrently and the time to then analyze the data assemble the NDA and do the submission, I think we have talked about 2012 as the timeline. Phil Nadeau - Cowen & Company: Great. That’s very helpful. Thanks for taking my questions.

Operator

Operator

Our next question comes from Tommy Nuane [ph] at Piper Jaffray.

Tommy Nuane - Piper Jaffray

Analyst

Hi good morning, guys. I am here for Thomas Wei. Thanks for taking our question. I just had a small follow up on the bone mineral density question and you alluded to osteopenia. I wonder if you can just comment on the rates of osteopenia in this younger population and specific disease population, how this would relate from your population in the trial versus historical data?

Chris O'Brien

Management

Thanks Tom. That’s actually an interesting and somewhat complicated, because there is opacity of data on this population and endometriosis in particular. Osteopenia as you know is just a defined as a T score that’s suggesting a subtle difference in DND from the mean values for a 30 year old otherwise healthy women. And if you just do a cross section of women in their 20s, you see not 1% of osteopenia. If you move into your 30s, it goes up and into your 40s where there is a considerable prevalence of osteopenia. So what we see with elagolix at the end of six months is a small percentage – I don’t have in front of me, but it’s in the single digits somewhere in the range of I think 6% or 7% of women that would technically qualify for osteopenia, but that’s the same as you will see in a placebo group when you look at the distribution of ages that we have in our trial, because obviously we have somewhere in the 40 years, 41 years of age and someone in at the low end of mean age is 30 years, 31 years. And in contrast, if you look at the number of women that meet the criteria for osteopenia with DMPA or Lupron obviously that’s considerably higher. So it’s a good question. It’s important to keep that in mind and what see with elagolix, particularly 150 is exactly what we would expect to see in that population. There is some data that suggest women with chronic disease especially autoimmune or inflammatory disease at one year, even women in their 30s have about 1% bone loss without any intervention at all. So I am seeing figures like we have with 0.5% bone loss, actually puts that quite nicely.

Tommy Nuane - Piper Jaffray

Analyst

Thanks. That’s very helpful guys.

Operator

Operator

(Operator instructions). Larry Smith at DLS Research. Your line is open sir.

Larry Smith - DLS Research

Analyst

Hi, I think you get this question every time about whether you have any information on the disease characteristics of this product. But can you give us any insight into whether you followed women who completed six months of therapy to be able to determine whether there is a change in lesions, whether a pain is still significantly different from baseline. And also, have you seen anything are you able to make any kind of observation on whether bone mineral density improves after elagolix is withdrawn? And I guess finally, have you seen any kind of unusual events in these women in the post treatment?

Chris O'Brien

Management

And so thanks for that question. I can answer that from our Petal Study. The 603 Study, as you recall six months of treatment, six months of no treatment and then for a small subset, we have even followed them out to Week 72, so an additional six months. And for the group that we followed out for six months post treatment as it relates to pain, we have seen that, in fact the pain scores as a quality of life scores and other measures show sustained and clinically meaningful improvement even six months after no treatment, even to the point that for many women, they wouldn’t qualify for enrollment in the study. They wouldn’t meet entry criteria, they’re still that much better. Now you asked also about lesion, we did not go back and do the so-called second look laparoscopic visualization of lesion counts and types. That was popular 10 years ago and people believe that will be a way of trying to look at disease modification, since then there is ample literature that shows that that’s not terribly useful because of the vagaries of lesion counting in general and the very poor correlation between lesion count and clinical symptoms and there is absolutely no correlation between lesion characteristics such as, is it hemorrhagic or a scar or (inaudible) or whatever and clinical symptoms. So we know that although an older drug like Leuprolide had in this label that there is a reduction in lesion count, we know from our discussions, we have been key investigators and regulatory authorities that we would not get a disease modifying label now based on just lesion count. Unfortunately, there are no good biomarkers for disease modification for endometriosis that are currently available and agreed upon by regulatory authorities. We would love to do that. And it’s obviously in my development plan that we are looking for these biomarkers and collecting proteomics and other kinds of data. But at the moment, that’s not a regulatory path that’s viable in the near term. We will obviously try to go after that for label enhancement as the science will support. And finally you asked about bone change in six months and follow-up, since we didn’t see much if any bone loss in the 150 group, you can’t look for really any improvement. What you see at six months with 150-milligram elagolix is basically what you see at 12 months after additional six months in another treatment. Now with the 250-milligram group and because there is a slightly higher number, it will be very, one would expect that and you would see a return toward the baseline mean, but I don’t have that data, we obviously didn’t have 250 milligrams in the Petal Study. So I hope that answers your question.

Larry Smith - DLS Research

Analyst

Yes, thank you.

Kevin Gorman

Management

Okay. So we’ve gone a bit of over and so we are out of time. I do appreciate everyone’s participation this morning. As you can see, our guidance at the beginning of the year, we continue on virtually every front, our burn is well controlled, we remain in a very good cash position. Elagolix, our lead program can – the drug continues to perform very well in the clinic, it’s displaying substantial and importantly sustained efficacy in two six months trial and it’s very well tolerated by the endometriosis which is a big departure from the currently available drug out there for endometriosis. And we continue to push forward in our other programs. So I would like to thank you all for your participation this morning and we look forward to talking to you throughout the rest of the summer as we get more clarity from the FDA and as our programs continue to move forward. Take care.