Neurocrine Biosciences, Inc. (NBIX) Q2 2020 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to today’s Neurocrine Biosciences Reports Second Quarter 2020 Results. At this time, all participants are in a listen-only mode. Later, you’ll have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] I’ll be standing by if you should need audio assistance. And it is now my pleasure to turn today’s conference over to Todd Tushla, VP of Investor Relations. Please go ahead.

Thank you, Ryland. Good afternoon, everyone, and thank you for joining our Q2 2020 earnings call. Joining me on the call is Kevin Gorman our Chief Executive Officer; Matt Abernethy, our Chief Financial Officer; Eiry Roberts, our Chief Medical Officer; Eric Benevich, our Chief Commercial Officer; and Kyle Gano, our Chief Business Development and Strategy Officer. During today’s call, we’ll be making forward-looking statements. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to review the risk factors discussed in our latest SEC filings. With that, I now turn the call over to Kevin.

Thank you, Todd, and good afternoon, everyone. I’m beginning to sound a little bit of like a broken record, but here I like sounding like a broken record is this quarter by any measure has been remarkable. The impressive achievements across the entire organization is a great display of the resilience of our Company, in this first full quarter that we’ve been living with COVID. This resilience is evident in our regulatory approvals, the advancement of our clinical programs, continued success of INGREZZA, and the growth of our pipeline. Now, I’m certain that tenacity of our employees and that of all of our external partners will allow us to fulfill our mission throughout this pandemic. We are presented with the same challenge as the COVID is presented to the entire biopharmaceutical industry. And yes, the fits and starts, the openings and closings in healthcare and the economy, just adds to the fatigue everyone is experiencing. However, this is temporary, and we have shown that we are adaptable. But perhaps most importantly, the fundamentals of all aspects of our business are stronger than at any time in the history of Neurocrine. INGREZZA’s importance to patients, their caregivers and healthcare professionals now is objectives demonstrated by the continued high-compliance rates of this past quarter. This unique environment where nearly 90% of patients interact with their physicians by telemedicine, will moderate back to a more balanced mix of in-person and telemedicine. While we are certainly encouraged with INGREZZA’s impressive growth until more patients are seen in the doctor’s office, we expect to see this impact on new patients starts as we discussed in our last quarterly call. Prior to this call, I looked back on the Company. I actually went back about two years ago from this time. And at that time, we were talking about the unique position we were in. We had two approved medicines and four compounds in clinical development. But today, we find ourselves with four approved medicines and 10 compounds in the clinic. I want to touch on that actually later at the end of our call, there’s more to it than just that. As always, we try to keep our opening remarks here to a minimum, so we can get through as many of your questions as possible. So, now, I’m going to be turning the call over to Eiry, Matt and Eric, and they’ll go into more depth in brief on each of the aspects of the business, starting with Matt.

Thank you, Kevin, and good afternoon. We’re really proud of what our team has accomplished with another great quarter for INGREZZA, two FDA approvals on ONGENTYS for Parkinson’s disease and ORIAHNN for uterine fibroids and expanding our psychiatry pipeline with the Takeda collaboration. We’re preparing to make ONGENTYS available to patients in the third quarter. And we formally initiated a registrational Phase 3 trial in CAH. With our commercial growth opportunities for our FDA approved medicines, our expanding R&D pipeline and our strong financial profile, we are well-positioned to execute on our strategy to become a leading neuroscience focused biopharmaceutical company. Regarding the financial results for the second quarter, INGREZZA sales were $268 million, which equates to approximately 46,400 TRx. Adjusting for channel inventory, we had approximately $256 million of underlying sales reflecting continued strong demand from existing patients. On the NRx front, although in-person patient visitations were very-low across the industry, the impact to NRx is less than initially feared. The step-down we saw in April held steady through the majority of Q2 and continued through July. Turning to the P&L, we had another strong quarter of profitability with Q2 GAAP net income of $80 million and non-GAAP net income of $139 million. We ended the quarter with $1.1 billion in cash on our balance sheet. This sequential increase includes approximately $15 million paid to Idorsia for the in-licensing of NBI-827104, but does not include the $120 million upfront payment associated with the Takeda transaction which closed in the third quarter. Looking forward, with the estimated diagnosis rates for TD at what we think is around 20%, we remain extremely optimistic about the long-term opportunity for INGREZZA. In the near term with COVID-19, we expect, there’ll be many ups and downs across the entire industry. For Neurocrine getting in-person patient visitation flow back near historical levels is an important aspect needed to both, make a meaningful difference for patients with TD and to advance our pipeline. What we saw in July is very similar to what we experienced in Q2 regarding NRx trends and acknowledge the longer pandemic related disruptions continue, the more the impact will be on INGREZZA in the short-term. These challenges are not unique to Neurocrine or INGREZZA. But as I said at the outset, we are quite proud of what our team has been able to accomplish in these circumstances. I will now hand the call over to Eric Benevich, our Chief Commercial Officer, to add further insight to our ongoing commercial efforts. Eric?

Thanks, Matt. I’m happy to provide a commercial update on our Q2 performance and insight into what we have seen so far in Q3. I’ll start off by saying that Q2 of 2020 may have been our best quarter ever, demonstrating, as Kevin said, the resilience of our entire team to continue our mission of ensuring that nobody with tardive dyskinesia suffers longer than they need to. We saw strong INGREZZA sales momentum in Q1 carry through into the second quarter. And the strength of our results in the first half of 2020 reflects the value of INGREZZA to patients and healthcare providers. With great execution from our home office and field teams, combined with the support of our select pharmacy network, the refill and persistency rates for existing patients were at record levels for Q2. Across the biopharmaceutical industry, it is important to note that because of COVID-19, new-to-brand patient starts declined due to an estimated 70% reduction in in-office patient visits. We were not immune to this trend and saw a decline in new patient starts in Q2. But as Matt noted, and as I note, the impact was not proportional to the reduction seen nationally in, in-office patient visits. With the advent of stay-at-home orders, our team adapted from in-office education to remote engagements. Although overall customer call volume decrease, we found that remote engagements resulted in generally higher quality, lengthier interactions with healthcare providers. Just as we went to a remote engagement model, the Psychiatry and Neurology providers communities also pivoted to telehealth platforms, helping to stay as connected as possible with their patients. While this is somewhat encouraging nothing can truly replace in-office face-to-face interaction between a healthcare provider and a patient, especially as it relates to diagnosing a movement disorder like tardive dyskinesia. The vast majority of people suffering from TD remains undiagnosed. In person clinic visits are important to improve TD diagnoses and treatment rates and get back on to our historical patient growth trend. As we enter into Q3, many of our field representatives are now back in the field interacting with customers, with personal protection and following appropriate safety guidelines. Healthcare provider access remains highly variable dependent on region and care setting. And we expect to continue to see a stop start pattern as the pandemic continues. However, the majority of the time we’re still relying on virtual methods to connect with our customers. It’s worth reiterating that during these challenging times. We are fortunate to have hired such experience and exceptional field teams, who have strong relationships with healthcare providers, and a true dedication to serving patients. Historically, Q3 has typically been a slower quarter for INGREZZA sales growth due to HCP, summer vacation and patient compliance dynamics. And now, we are also addressing the COVID-19 situation. While we expect refill rates to carry over for existing patients into Q3, we do expect the continued impact on new patient starts and may see channel inventory pull back a bit. Now, I’d like to switch gears and talk about ONGENTYS, our newly approved medication for movement disorders, which we believe has a tremendous opportunity to help a lot of patients with Parkinson’s disease suffering from motor fluctuations. I’m very pleased with the label our clinical and regulatory teams were able to secure, and we are now planning to make ONGENTYS available to patients in the United States by the end of this quarter. Our launch efforts with ONGENTYS will focus on education, something that our entire commercial and medical affairs teams excel at as witnessed by the continued success of INGREZZA. ONGENTYS is the first and only FDA-approved once nearly COMT inhibitor for people with Parkinson’s disease to help patients achieve more consistent motor symptom control. It’s one capsule taken once a day, which is convenient for patients and may lessen daily pill burden levels for Parkinson’s patients. It also has a demonstrated safety and tolerability profile that’s attractive. It’s our belief that ONGENTYS can deliver on the broken promise of previously launched COMT medications, which fail to live up to the expectations of the Parkinson’s community due to the need for frequent dosing, perceived weak efficacy and/or rate limiting side effects. We’re excited to bring this new therapy to our movement disorder neurology customers. We believe ONGENTYS will be well-received by the Parkinson’s community and will benefit our efforts with INGREZZA in TD as well. Having two phenomenal products to promote will give us more face time and opportunity in neurology practices, and burnish our reputation as a leader in movement disorders. Despite the many challenges brought on by the pandemic in the near term, the long-term opportunity in treating movement disorders with both INGREZZA and ONGENTYS remains extremely compelling. Now, I’ll turn the call over to my colleague, Eiry Roberts, who will provide an update on our progress with the pipeline. Eiry?

Thank you, Eric, and good afternoon to everyone on the call. I’m happy to provide an update on our clinical programs. Before I begin though, I want to thank the many people at Neurocrine and our excellent partner organizations who continue to work with passion on all research and development efforts across the portfolio at this time. It’s amazing to reflect that since the beginning of 2019, in just over one and a half years, we have doubled the size of our R&D pipeline, which now includes potential first-in-class or best-in-class clinical candidates designed to address patient needs across a diverse range of serious and underserved conditions within neurology, neuroendocrinology and psychiatry. We know that COVID-19 has significantly impacted clinical trial execution across our industry, and as the impact of the virus continues to evolve, Neurocrine has invested extensively in approaches to progress our clinical trials in a safe and responsible manner for trial participants and healthcare professionals. These approaches include the remote qualification status of investigative sites, remote monitoring of safety and of the data, home health care visits and the adaptation of endpoints in clinical trials to enable telemedicine assessments where appropriate. These changes have led to the successful re-initiation of screening in all previously-posed clinical trials over the past few weeks. I’m pleased to announce that in July, we achieved the exciting milestone of the first patient screening in the single global registrational study of crinecerfont for adults with classical form of congenital adrenal hyperplasia, or CAH. The results from our Phase 2 study presented in June at ENDO online informed a productive dialogue with regulatory authorities in the U.S. and Europe, resulting in the approval of the final designs for this global single registrational study, now called the CATALYST study. The CATALYST study is a Phase 3 randomized double-blind placebo control study to evaluate the safety and efficacy of crinecerfont in adult subjects with classical congenital adrenal hyperplasia, followed by an open-label treatment period. Approximately 165 subjects from North America and Europe will be enrolled in the study and will participate in a 6-month randomized double-blind placebo controlled period followed by one year of treatment with crinecerfont. The primary outcome measure for the study is the percent change from baseline in glucocorticoid daily dose at week 24. Secondary measures include change from baseline in androstenedione at week 4, the proportion of subjects able to achieve physiologic levels of daily glucocorticoid dosing at week 24, together with a variety of clinical outcomes related to metabolic health, including body weight and fat mass. We’re excited to begin this important study with the hope that crinecerfont will provide a valuable and differentiated treatment option for patients in the control of their underlying congenital adrenal hyperplasia. With a much needed added benefit of enabling patients to significantly reduce the amount of glucocorticoid, they need to take every day over the course of their lifetime. In parallel with the initiation of this pivotal adult study, we recently successfully reinstated screening in the Phase 2 proof-of-concept study in pediatric CAH and continue to progress our discussions with regulators in Europe and the U.S. in support of the initiation of a single global registration study in pediatric subjects. Beyond crinecerfont, the Phase 3 registration study of valbenazine to treat chorea in patients with Huntington’s disease is now also re-enrolling patients. Regarding our expanding mid-stage pipeline, we continue to make good progress in support of the initiation of Phase 2 studies for the treatment of two distinct rare pediatric epilepsies by year-end, for NBI-352 and NBI-104 the novel precision medicine assets in-licensed from Xenon and Idorsia, respectively. In addition, our partner AbbVie continues to develop elagolix for the treatment of polycystic ovary syndrome. Finally, our newest Phase 2 program NBI-644 formerly known as TAK-831, continues to enroll patients in the global proof-of-concept study, designed to assess tolerability and efficacy in the control of negative symptoms of schizophrenia. Results from this study are expected in the second half of next year. You will notice today on our pipeline chart that we’ve removed the VMAT2 follow-on molecule previously in Phase 1 development. The time spent with this molecule was very instructive and taught us a lot more about the VMAT2 mechanism. With this knowledge, we remain excited about the potential value that we believe VMAT2 inhibition can bring to patients across a broad range of neurological and psychiatric conditions. We remain firmly committed to bringing forward additional clinical candidates for this target and will keep you posted on our progress. In thinking about the remainder of the year, it continues to be difficult to predict what impact the pandemic will have on our R&D programs. But despite these current challenges, let me reiterate that our plan for 2020 remains unchanged. By year-end 2020, we intend to have three registrational programs ongoing and with the addition of NBI-644 to have five mid-stage programs in the clinics. It’s an incredibly exciting time for research and development at Neurocrine as we continue to build a world class neuroscience pipeline. I’ll close once again, by thanking all my colleagues for their truly inspirational efforts and dedication to Neurocrine’s mission to relieve patient suffering and enhance patients’ lives. With that back to you, Kevin?

Thank you, Eiry. Before I open it up with questions, I’d first like to highlight Neurocrine’s corporate sustainability efforts. As Eiry said, our mission is to relieve suffering and enhance lives. And fundamental to this is our responsibility we have to our patients, customers, partners, shareholders in society at large. And in that light, we really simply issued our first corporate sustainability report that can be found on Neurocrine’s website, which highlights the connection between our mission and the environmental, social and governance programs we believe to be most impactful to our Company and society. The disclosure of this report just marks the first step in communicating our ESG strategy. As the strategy evolves, we look forward to engaging with you on the sustainability issues that matter most to ensuring we continue to develop on our mission -- to deliver on our mission and to help patients and drive long-term shareholder value. So, with that said, I’d like to open it up for questions, please.

[Operator Instructions] We will take our first question from Paul Matteis. Please go ahead. Your line is open.

I’m going to try to ask a couple of questions now. And hopefully my phone still works. I’m trying to get a better understanding of how many patients you guys added this quarter. And there’s a lot of moving parts, I guess, maybe just for one, can you quantify a little bit more of the increases in compliance and refill rates and how that should inform our sequential patient add estimate? And then second, what’s going on with inventory? And where are you relative to steady state and how much of a drawdown do you foresee happening over, say, the next three to six months? Thanks.

Yes. Sure, Paul. So, for the second quarter, a couple dynamics led to the sales increase. First, gross net came back from where we were at in the doughnut hole in the first quarter. The second element, as we experienced last year, we did have a step-up in level of patient staying on drug as well as refill rates. And that was an incredible effort by the team and our specialty pharmacy network to ensure that patients stayed on medicine in the quarter. And I think, it is really a testament to the value that patients ultimately get from taking INGREZZA. On the new patient front, we’re not going to get into the ultimate quantification there. As we described coming out of Q1 you did -- we did have a step down in NRx in April due to COVID. But, it wasn’t anywhere near the 70% drop that you saw on inpatient, or in-person patient visitation. So, that NRx rate stayed very steady throughout the quarter. We weren’t to a point where -- because when you’re a big brand like INGREZZA, you do have your natural discontinuations. We weren’t at a place where NRx was less than discontinuations. But as Kevin and I both said in our prepared remarks, we know for INGREZZA to reach its long-term, potential and we’re very confident in the ability for INGREZZA to reach its long term potential. We have to see in-person patient visits get back near historical levels. And I think that many other companies are dealing with this in a very similar way, and it’s not unique to Neurocrine. Then, I think, the last piece to your question relates to channel inventory, and it is something that’s very difficult to predict. We had three straight quarters of build. And we tried to disclose that number, so that you can normalize our sales to reflect an adjusted sales number that more represents the underlying sales results for the Company. So, in this quarter, for example, although reported 268, 256 is the right baseline last quarter, it was it was around 227. I do -- we would expect there to be a drawdown in inventory, Paul. It’s hard to get into -- want to get into the nuances of why stocking occurs, sometimes it’s because your distribution channel sets up another site for distribution, for example. But over the long-run, I think that our inventory levels should be around two weeks on hand. And I would expect at some point there to be a drawdown in inventory.

Thank you. That’s helpful. And can I just ask one quick follow-up, Matt? Last year, you saw a pretty big snapback on average script per patient in Q2 relative to one 1Q. And in 1Q this year, you said the seasonality issues weren’t as significant. Is there anything you can say about any sort of reversion benefit you saw on average script per patient in this quarter, I guess sort of understanding the broader context here as to trying to figure out what the underlying patient that number is? Thanks a lot.

Yes. Like you said, last year, we had a big step back up in average script per patient from Q1 to Q2, as people went through the authorization or reauthorization process in Q1. And this year, team did a great job and actually was better year-on-year from a net revenue -- or revenue -- script per patient. So, you’re right. You wouldn’t have seen as significant of a step-up from Q1 to Q2 this year in that script per patient.

All right. Thank you so much.

Ryland, we’ll take a next question.

Our next question comes from Phil Nadeau. Please go ahead. Your line is open.

Good afternoon. Thanks for taking my questions. And let me add my congratulations on a great performance in tough circumstances. Matt, maybe first one for you. Looking at the disruptions that you’re calling out into Q3, just qualitatively, I’m trying to understand is the first four or five weeks of Q3, are they looking better than what you experienced in Q2, is it more of the same? Can you just qualitatively give us some help as we project into Q3 and we try to come up with a revenue number as to what you’re seeing in the field?

Yes. Good question and good to hear from you. What we saw in July from an NRx perspective is very similar to what we would have seen April, May and June. So, we had seen a step down going into COVID, and then it’s pretty much stabilized. And I think we were all in hope as a society, when things started looking a bit better from the economy opening up. But then, once it’s shut back down again, I would say that we’re at a very similar level of NRx, which is absolutely a testament to our field sales team, the medical professionals that are helping us here that people with tardive dyskinesia, new people are still getting access to INGREZZA and existing patients are remaining very, very compliant. So, I think the cautious statements that you hear forward-looking, the team is doing a great job and we expect them to continue to do a great job. But for us to have an NRx level, that’s significantly above discontinuation that naturally occur on any medication, we need to see in-person patient visits get back up to higher levels. Eric or Kevin, any other insights?

Yes. Phil, I guess, I just want to add one thing is that -- as I said in my opening statement, with the snapping open-close and things like that, and I hope we don’t, for society’s sake, we don’t keep getting whipsawed back and forth like that. But, as it does that, there -- I’m sure you feel it, everyone does, there is a certain fatigue that goes in there, and patients and care givers are no different. And so, it again is a testament to just what a terrific job, that our field sales team is doing, that they keep at it and they keep delivering each and every quarter. But, that’s where you see a bit of a caution in our voices coming off of, again, two really nice quarters that we’ve had thus far is you just don’t know what to expect in front of you as things open or close. And we don’t want to lose sight of that because while Eric and his team adapts amazingly well to these things, this, we seem to get curve balls, almost weekly. Right?

Right. That helps a lot. If I could just follow up with two pipeline questions. The first on ONGENTYS, do you have a sense of when BIAL will be ready to resupply the market or when they’ll be ready to tell you when they’ll be ready to resupply market? And then, second on the CAH Phase 3 study, according to clinicaltrials.gov, the primary completion is February 2023. Should we expect results, therefore, from the primary endpoint in the first half of 2023, is that reasonable or is there something I’m missing in the clinicaltrials.gov?

So, Phil, I’m going to take the first part there. BIAL did a great job of getting the whole supply chain in order. And because they’ve done such a good job, we are confident that we will be launching this drug and supply chain is not an issue at this point.

With respect to the CAH question, I mean, I’m really proud of how the team has worked with our external partners in enabling this to get up and started. I mean, obviously, like all of our research efforts, there is impact around the world from the COVID-19 pandemic. As soon as we kind of get a few months into the trial and understand enrollment relative to our current expectations, we’ll be able to give you a much better update. But, with respect to the enrollment estimates that we took into the trial, those dates that are in ct.gov are consistent.

We will the next question from Brian Abrahams. Please go ahead. Your line is open.

Hey, guys. My congrats on the quarter as well. Thanks for taking my questions. On INGREZZA, I’m curious if you can talk a little bit about how telemedicine and your detailing approach maybe has evolved over the course of the pandemic. We’re seeing shifts in regional utilization. And, are there ways that you can improve comfort diagnosing movement disorders via telemedicine to maybe help drive some new patient growth if the pandemic continues to linger?

Yes, absolutely. As I mentioned in my prepared remarks, we’ve had to adapt to this new environment. And as our neurology and psychiatry customers have moved to a remote engagement model with their patients via telehealth platforms, we too move to a remote engagement model with those prescribers. And what that looked like early on was essentially taking a lot of the existing educational content and adapting it to remote engagement platforms, like Zoom, GoToMeeting, even FaceTime. And as we went forward through Q2, we became a lot more proficient in terms of understanding how to reach people that were no longer necessarily in the clinic, and how to engage them either in discussions about TD or INGREZZA or really supporting existing patients, as Matt talked about for refills. Going forward, I certainly believe that there’s an opportunity to develop new tools and resources to assist in diagnosing TD remotely. And of course, as we’ve done in the past, we’re going to have to blaze a new trial here. This isn’t something that’s been done on a widespread basis. We’ve been learning a lot from thought leaders and from prescribers in the community, about how they’re assessing movements remotely and their patients. And we’re capturing those best practices, and we’re integrating them into educational content that we’ve been more recently rolling out to our customers. So, I think that telehealth is here to stay in many ways. Certainly, it’s somewhat offset the steep decline in patient the interactions between the HCPs and patients. But, ultimately, even after we get past this, this health crisis and return to a more normal posture, ultimately, telehealth is going to be at a higher level than what it was previously. And just as we’ve continued to adapt with this learning lunch, we’re going to adapt to this new environment and make sure that regardless of whether a provider is seeing a patient in-person or remotely, we’ve gotten relevant, credible educational content that will help them make that diagnosis and of course, when appropriate, choose INGREZZA.

Got it. That’s really helpful. And then, the pricing for ONGENTYS was recently announced. I was wondering if you could give us a little bit more color on your engagement with payers thus far, as you prepare for the launch later this quarter, expectations for access. Would you expect any step edits through other classes, like MOB inhibitors or other COMT inhibitors? Thanks.

Sure. Yes. So, we announced price, I want to say, like, two or three weeks ago. And our WACC price is 590 per month, which is below the threshold for specialty tier on Medicare plans. So, we made that choice with patient access in mind. And as we said previously, patient access is critically important for us as a company. Price isn’t the only element of our access plan. Obviously, we have our field reimbursement team in place. We have built out our patient support program. And there are other elements that will be available at the time of launch. But ultimately, we want to make sure that patients that need access to ONGENTYS can get it. With the announcement of price, we’ve actually started to engage with payers ahead of our commercial launch. And the goal there is to introduce them to the products and to the labeling and to understand how they’re currently managing adjunctive treatments in the Parkinson’s category, and to start to make sure they understand that -- step edits through -- other COMT inhibitors or other classes of adjunctive treatments may not be beneficial for patients. And so, initially, as we get out the gate at the end of Q3 and into Q4, ONGENTYS is going to be a non-formulary drug. And it’s going to have to be approved on a formulary exceptions process, and we’re very good at this. Obviously, we had to go through this with INGREZZA. As we get into 2021. Certainly, we’ll start to see formulary decisions made, and those will be publicly available for you as well. But initially, out of the gate, it’s going to be a formulary exceptions process. And we’re currently engaging with payers to make sure they understand the value that we’re bringing with ONGENTYS

We will take our next question from David Amsellem. Please go ahead, David. Your line is open.

Thanks. So, couple of crinecerfont questions. So, if it’s not lost on anyone that there are other CRF type 1 receptor antagonists that are in development. So, with that in mind, I’m specifically alluding to tildacerfont, the Spruce product. What’s your take commercially on the market’s ability to accommodate more than one anti-CRF 1 products? So, that’s number one. And then, secondly, I appreciate all the color on the global Phase 3 study. I guess, my question here is, what’s your take on which end points you think are the most commercially relevant? I mean, is it indeed steroid burden? Is it something along the lines of more direct clinical endpoints, like body mass or bone density? Help us to understand how you’re thinking by that in terms of commercially relevant endpoints? Thanks.

Thanks for the question, David. So, a few questions in there, actually. So, let me just start with the first question. First thing that’s absolutely clear is there is very significant global unmet medical need in congenital adrenal hyperplasia. Patients’ really only treatment option right now is steroids, glucocorticoids often at very high superphysiologic doses, which in of themselves lead to a lot of issues over the course of a lifetime in terms of side effects. With respect to our crinecerfont program. I mean, we’re absolutely delighted that we’re now entering what will hopefully be the last stage of clinical development in the registration study that we just initiated. And so, I think we find ourselves in a little bit of a different situation from potentially the competition. With respect to the design of the study itself on our overall program, we really designed this study based on a lot of our learnings previously from our valbenazine programs, from elagolix involvement. And it’s really very holistic in terms of the problem looking at the end points within that trial. Obviously, we know that managing the steroid hormone levels in patients with CAH is important and that that is any time how they manage their disease day-to-day. But, when we look at the clinical relevance of that, it really becomes much more important for us to think about endpoints like the ability to reduce the glucocorticoid dosing. So, we designed our program with the six months endpoint focused on steroid reduction in order to gain a very-important set of efficacy and tolerability and safety data that we believe will then serve many stakeholders, including the patients, the caregivers, the healthcare professionals, regulators, and ultimately payers around the world. And so, I think, in doing so, as we come to the completion of this study, we believe we will have a very robust set of data, combining this and the previous clinical data that exists with crinecerfont in order to support the registration of this medicine, and ultimately it’s the ability for patients to get access to the medicine.

Our next question comes from Paul Choi. Please go ahead. Your line is open.

Thank you. Good afternoon, everyone and congratulations on the quarter and all the progress. I think, during the earlier prepared remarks, you talked about maybe a 20% diagnosis right now for TD. I was wondering if you could maybe just sort of comment on are you seeing a step up just in physician recognition or do you think this is being driven by any particular factor, such as your advertising, if you can maybe just elaborate on that? And just as you think about the diagnosis right here or over the short to intermediate term, is this sort of rate of increase we should think about in terms of our modeling? And then, I had a follow up.

Well, I think as it -- hey, Paul. This is Matt, and then Eric will give you a little bit more insight as to what he’s seeing from a customer perspective and where we’re generating new demand. For modeling purposes, I just want to flag. The movement from Q1 to Q2, the growth there was largely driven by the gross to net change and then patient compliance and persistency, and then also, some level of growth out of the net new patients less discontinuation. So, going forward, Q2 to Q3 sequentially, what we’ve been talking about is that our NRx levels have to remained very-steady, which is good, and because relative to the drop in-person patient visits, it’s much higher than that. However, to have sustained growth similar to what we’ve seen historically, we need in-person patient visits to get back closer to normal, which none of us can predict when that’s going to occur. But, Eric, can talk through what he’s seeing on the customer front, our insight to that 20% diagnosis rate and where we go from here with that.

Yes, Paul. So, I think it’s important to note that that estimate of about 20% of patients and the prevalent population that have now been diagnosed with TD, that’s after about four years of effort and educational push on the part of the Company. When we started developing this market, there was we estimate low-single-digit percentage of patients that had actually been diagnosed with tardive dyskinesia. And so, over time, we’ve seen that percentage of patients increase. And as we get to the middle of this year, our estimate is around 20%, have now been given a diagnosis. As Matt said, diagnosis is largely a function of education and also HCP interaction with patients with the dramatic decrease in patients flowing through clinics and hospitals that decreases the likelihood of TD being diagnosed. And I’ve spoken about the pivot that we’ve made to help providers be more comfortable and confident in making that diagnosis remotely. Obviously that diagnosis is happening remotely. As Matt said, the decrease in new patient starts that we’ve seen with INGREZZA has not been proportional or commensurate with the decrease in patient foot traffic to these clinics. So, the takeaway here is that this is a short-term disruption in our belief in terms of what that diagnosis rate will be and what the impact is on new patient starts. The vast majority of people with TD remain undiagnosed, and it’s our commitment to continue our educational efforts, whether it be in-person or remote engagement to help providers make that diagnosis and get them -- those patients started. So, I hope that provides a little bit more context for you.

Yes. That’s great. Thank you for that color. And one quick one for Eiry, with regard to the Phase 3 in Huntington’s, which you mentioned, has resumed enrollment there. As you think about the clinical outcomes, given that you will technically be potentially second to market here versus the competition, have you thought about any other incremental data points that you’d be gathering from a trial that might help with potentially with formulary positioning with regard to Huntington? Thank you.

Thanks, Paul. So, the trial is designed as a registrational trial. The primary endpoint is actually the chorea score as part of the UPDRS score. And that is the obviously an important endpoint in terms of determining the impact of valbenazine on the important chorea outcome. We have other quality of life measures included in that study, which we believe are important as we seek to support the Huntington’s chorea patient most appropriately moving forward. In addition, I would say that in terms of the context of differentiation for valbenazine in this study, we’re very-encouraged by the profile that we’ve seen up to this point of INGREZZA. The difference is in the label with respect to blackbox warning relative -- the absence of a blackbox warning relative to our competition, and obviously being a once a day therapy with a straight forward dose escalation and titration. We believe all of those are differentiating. And in fact, we’ve designed the study in order to give us the best opportunity to address any differences as they occur.

Our next question comes from Marc Goodman. Please go ahead. Your line is open.

First question is about inventories. You mentioned that you believe inventories will come back down to two-week levels. Can you just tell us where do you think they are right now? Second question is on SG&A, which seems a little lighter than I would have expected in the quarter. Can you just talk about why that was? And will you be adding sales reps for the launch of your new Parkinson’s product? And then, I guess, third, tardive dyskinesia relative to all these other therapies out there, it’s just, I guess, amazing to me why you’re having such success in such a tough environment relative to everybody else. And I just was wondering if it’s just -- I mean, obviously, you’ve attributed to a lot of different things, but is there -- I mean, is there anything special about tardive dyskinesia that you could figure out, or is it really just persistence of the patients and stuff? Because we’re seeing new patients down, you’re telling us. So, I was just curious, if you give us some more color on that? Thanks.

Yes. Hi, Mark. I’ll take the first two questions and then hand it off for the tardive dyskinesia. On the inventory front, this is the first time we’ve ever been over three weeks on hand. And like I said earlier, I think it has to do with a little bit of phenomenon of one of our partners actually stocking up a new warehouse. And I’d expect that they will normalize that. Historically, we’ve tried to keep our inventory levels below two weeks, but now, they’re actually over two weeks. So, and what I’ve even seen on ordering pattern so far this quarter, in July relative to the underlying TRx demand, it looks like there has been some slight bleed down. But like I said, I think, the best way to measure our sales results is to look at us on an inventory-adjusted basis. And that’s something that we’re going to continue to disclose every quarter, so that people can see what true underlying demand is. On the SG&A front, there’s really two aspects that led to the sequential decline from Q1. Number one is that you typically have a seasonal spend that’s concentrated in Q1 and then that recovers in Q2. The second piece is that we do have some spend that was slowed down, as it relates to COVID-19, some of the field-based activities that we would have normally been spending behind, aren’t necessarily -- weren’t being done at the same level as what they were. We aren’t in a place where we’re trying to squeeze out as much profit here in the near-term as possible. It’s just how things shook out on the SG&A front as well as the slowed down in R&D spending. I would just flag, as people want to think about R&D investment going forward, we did have a lot of trials pause. We have more getting back up and running now. And when you think about the Takeda collaboration, Idorsia product as well as Xenon, and then all the other programs Eiry mentioned, we’re so excited about what we have ahead of us from the number of clinical programs that we’ll have up and running. And from a spend perspective, that’s going to lead to a big step up in spending in 2021. But, believe that really positions us well for the future. So, I’m going to hand the next part of the question about what makes -- or what drives our ability to diagnose TD -- or a physician to diagnose TD in this environment, over to Eric or Kevin.

Yes. It’s a good question. What is it about TD, what is it about INGREZZA that’s allowed us to be so successful despite the circumstances? I think, this is just a few external factors and then there is a few internal factors. It starts off with the aspect of TD that many people don’t really appreciate is that there is a real significant disease burden here. People that are living with TD experience it every day, and it affects their lives in many different ways, functionally, emotionally, in terms of their willingness to engage with others in the community. The second thing is that INGREZZA offers a really meaningful benefit, and that’s been seen not only in the clinical trials where we saw significant improvements as quickly as two weeks, but also, based on the trial and adoption that many providers have gone through over the last several years, they try it in a few patients, they see that it offers a meaningful benefit, and that motivates them to treat -- diagnose and treat additional patients. And then, the third external factor, which is important to note is that the HCPs that are out there, the psychiatrists, the allied health professionals, they’re very passionate about caring for these patients and they recognize that these are individuals in our society that are often overlooked, and frankly stigmatized. From an internal perspective, we talked about the high-quality people that we’ve hired both in the field and in the home office that are very committed to helping these patients get access to INGREZZA. And in addition, I think, frankly, having a really strong select pharmacy network has benefited us as well in terms of patients being able to get refills, despite the disruptions caused by the pandemic. So, all of those things together, I think have added up to the success that we’ve seen, certainly with very-favorable refill and persistency rates in Q2. As we’ve mentioned before, the longer that this pandemic goes on, especially with this stop start pattern that we’re seeing in different states and even at the county level around the country, it makes it more challenging to help patients get started on treatment. But, despite all this we remain committed to helping our providers, whether it’s an in-face or a remote interaction with the patient. And certainly, we expect to continue to be successful in the near term and over the long haul.

We will take our next question from Biren Amin. Please go ahead. Your line is open.

Hi, guys. Thanks for taking my questions. Maybe I could just start on INGREZZA. I know you’ve discouraged us from using IMS script data. But in the second quarter there was 10% sequential decline in TRx data from IMS, compared to what you reported today, just 12% sequential growth. What do you think is a reason why IMS is failing to capture the script kind of at the sites where they collect data?

Yes. Biren, definitely understand your question. And our conversations around IMS data have been not to use it as a proxy for our sales results. I think, it captures different of our specialty pharmacies or close door pharmacies data, and it sometimes can’t be as representative as other periods. So, hard to determine why it was different than what our results were. But like we’ve said, inventory adjusted, we had a sequential increase of about 8%, I think, TRx, which was very strong in this environment.

Got it. And then, on ONGENTYS, I know you’ve had some payer discussion, they’re engaging with payers. Should we be expecting a step edit through entacapone?

So, Biren, our base expectation is that we wouldn’t, just based upon the value that we have -- that we see in ONGENTYS relative to entacapone. But, payer conversations are still very early. And that’s something that we’re hoping to get more insight on over the next three or four months. But, we have a very good -- as Eric said earlier, a very good payer account team that is currently meeting with payers as we speak.

The only other thing I’ll throw in there is that initially this is going to be a non-formulary product and we’re going to have to go through a formulary exceptions process. Majority of these patients are Medicare Part D. And Medicare Part D plans have up to six months to review new products. Part of our message to the payers is that it wouldn’t be medically appropriate to force patients to step through entacapone. And certainly, we’re bringing our payer account team and the medical science liaison until those conversations. We’ll see how the coverage policies shape up over the next year or so. But our position is that that’s not medically appropriate or necessary to manage this class and this product. And certainly our pricing decision wouldn’t be one that would make that -- something that payers would necessarily rush towards.

And then, maybe if I could have a pipeline question on the Phase 3 CAH trial with the primary endpoint being steroid reduction at week 24. How are you setting up the algorithm for the steroid taper? Is it based on, I guess, improvements on certain biomarkers like, androstenedione? And is it on improvements to the upper limit of normal, or is it based on reductions of baseline on that patients come in with on these biomarkers?

You asked a very important question, Biren, not one that I’m going to be able to talk very much about on this call. I mean, obviously, as you can imagine, we have spent a huge amount of time with external experts in the field and the regulators and everybody else to finding the most appropriate trial design here to get the most robust set of data. And from a competitive perspective and from just ensuring that we can do the right thing by patients here, we’re really not talking about the -- how we’re actually doing that steroid reduction at this point.

Ryland, let’s see, if we can sneak two more in here?

Okay. We will take our next question from Charles Duncan. Please go ahead. Your line is open.

Thanks for taking my questions, Kevin and team. Congrats on a great quarter progress, particularly in terms of pipeline building progress. It is notable in the last couple years how this has expanded. Most of my commercial questions have been asked. So, I did want to just ask a couple of pipeline questions. When you consider the kind of timing to data with the valbenazine program versus the crinecerfont program in CAH, what would you anticipate to read out first? And can you help us understand kind of the pacing of patient enrollment in those two programs?

Yes. Thanks very much. So, we were very pleased initially that we were able to reopen safely and responsibly the HD trial enrollment and obviously, see the significant unmet need in Huntington’s disease still, because so few people are currently treated with VMAT2 inhibitor. And so, we are seeing good signs of screening and enrollment in that study. And we anticipate that that will hopefully, given the if the COVID-19 situation kind of stays relatively stable, that we will be able to move forward effectively there. And with crinecerfont, we are just initiating the Phase 3 registration trial. That is a global trial. And as I mentioned, I think in response to your previous question, we -- our estimates that we see in clinicaltrials.gov are our initial estimates of enrollment. We will need to see how things progress in the next few months as that trial gets up and running to understand the overall timing. So, it’s really difficult to predict at the moment.

It’s helpful, Eiry. I appreciate that. And then, perhaps either for you or for Eric or whoever wants to take it, when you think about valbenazine in Huntington’s chorea, you mentioned differentiation of valbenazine or INGREZZA in tardive dyskinesia, which is obvious to me relative to the competition. But, help me understand valbenazine in Huntington’s versus say, tardive dyskinesia, what are the strategies that you’re contemplating to really differentiate the two products, or could you see parity pricing? Help me understand, is there a dosing thing? How will this be a different drug? Because they need to be?

Yes. So, Chaz, I’ll take that question. I think, it starts with our perspective that there’s still significant unmet medical need in Huntington’s chorea. The majority of patients that exhibit moderate to severe chorea movements still are as yet untreated with VMAT2 inhibitor. And there are varying reasons for that relating to, for example, safety concerns or tolerability issues, challenges with dose titrations, things like that that may give us an advantage in that particular market. But, the reality is that majority of people that could benefit from treatment with an approved option are not currently being treated. So, we certainly feel like there’s room for another treatment option, one that we’ll have to see what the data look like. But, based on the target product profile, we think there will be multiple points of differentiation that perhaps are similar to the way that we differentiated in the TD market. So, we’re excited about the opportunity to complete the study and to see what the profile that emerges looks like here. But, based on what we know about INGREZZA in TD, we’re confident that there’s a meaningful opportunity for us in the Huntington’s chorea market.

Okay.

Let’s take one last question, Ryland.

We will take our last question from Jay Olson. Please go ahead. Your line is open.

Hey. Congrats on the quarter and thank you for taking the questions. I’m curious about the impact of discontinuing your second gen VMAT inhibitor. And I was wondering if that decision might lead you to increase your focus on additional indications for valbenazine and/or any other life cycle management strategies? And I had one quick follow-on, if I could.

Hi, Jay. Thanks for the question. So, as I mentioned, I think we learned a great deal from the experience of the VMAT2 follow-on molecule that we had in Phase 1 development. And we’re looking to apply all of that learning as we bring forward next generation research candidates into the clinic, because we do think that there is a significant opportunity for VMAT2 inhibition across a broad range of different neurological and psychiatric disorders, even beyond that what valbenazine would be able to bring to patients. So, we’re very focused on that. And then, also obviously in parallel we continue to be very-focused on understanding potential new indications for valbenazine. And as we move forward and get any of those into the clinic, we’ll be sure to update you.

Okay, great. Thank you for that. And then, since your business development team has emerged as an important competitive advantage, as you add innovative new assets to your portfolio, can you talk about the appetite for more deals and any potential gaps in your portfolio where you may like to add new molecules?

That’s a great question. This is Kyle. Yes, I think that we’re going to continue to focus on our commercial success with INGREZZA and then taking that to ONGENTYS here shortly. And we’re focused on funding those as well as the pipeline. But, in terms of our interest in business development, we’re quite pleased with the way things have transpired over the past 12 to 18 months. If you look at the portfolio, it’s been diversified by stage and by modality and by disease state. So, a lot of the things that are attractive to us in neuroscience have played out nicely for us. We need to execute on the clinical studies to get those off and running, but we continue to also look at building the pipeline over time. If it makes sense to bring additional assets, we’ll find ways to make it happen.

And I will turn it back over to Kevin Gorman.

Thank you very much. We’ve said this before, but sincerely, we feel very fortunate to be in the position that we’re in and the way that this year is shaping up for us. We have an outstanding medicine in INGREZZA. And as all of you have pointed out here, it’s just a medicine that is so appreciated and so needed in this patient population. And that is going to go on for years, driving our Company. And now we get to add yet another important medicine that’s coming through in ONGENTYS. And so, we’re really looking forward to bringing that to patients. And I do appreciate all the questions that you’ve had today and particularly, in the last part too about our pipeline. As I said, at the beginning, we have 10 pipeline programs, but it’s not just the number of those programs when you look at it. Our pipeline consists of three pivotal programs and five more. They’ll be in mid-stage development by the year end and then two in early-stage. So, it’s a really well-balanced pipeline right now. Our medicines offer the hope for significant symptomatic treatments, disease modification, and we’re in precision medicine. And as Kyle said, we’re not constrained by a single modality. Currently we’re developing small molecules and we’re developing gene therapy. The therapeutic areas that we’re in is neurology, neuroendocrinology and neuropsychiatry. We started out with an audacious goal a number of years ago and we have stuck with that and we said it out loud and that’s -- we’re dedicated to being the world’s leading neuroscience company. And what you’re seeing now is just the beginning. So, I really do thank you for your questions and your participation today. Take care.

This concludes today’s program. Thank you for your participation. And you may disconnect at any time.