Kevin Gorman – President and CEO Jane Sorensen – IR Tim Coughlin – CFO Chris O’Brien – Chief Medical Officer.

Mohit Bansal – Deutsche Bank Charles Duncan – Piper Jaffray Ian Somaiya – Nomura Securities Phil Nadeau – Cowen & Company.

Good day, everyone and welcome to Neurocrine Third Quarter Earnings Call. It’s now my pleasure to turn the conference over to Kevin Gorman, President and CEO of Neurocrine Biosciences. Please go ahead..

Thank you. Welcome everybody. Before we get started Jane Sorensen is going to read our Safe Harbor statement..

Good afternoon. I want to remind you of Neurocrine’s Safe Harbor caution. 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 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. I’m joined with Tim Coughlin, our CFO; and Chris O’Brien, our Chief Medical Officer today. As usual we’re going to go over the financials which are very much in line with expectations and our guidance. And then we’ll do a brief update of all the programs.

What I’d like to startup by saying is that we have had significant progress in virtually all of our programs coming into this especially with the news that we released last week on getting the breakthrough therapy designation from the FDA.

And Chris will be able to go over that and answer any of the questions that you might have on exactly what those breakthrough therapy mean and what does it do for the program. So, let’s start out with Tim, could you take us over the financials please..

Sure. Thanks, Kevin and good afternoon, everyone. Thank you for joining us on this third quarter earnings call. My comments will be brief as the quarter was very straight forward and right on our financial plan. Neurocrine had a net loss for the quarter of $15.9 million or $0.21 per share based on approximately 76 million shares outstanding.

Our 2014 year-to-date loss was just over $41 million or $0.56 per share compared to a year-to-date loss of $35.4 million or $0.53 per share for the first nine months last year. We ended the quarter in excellent liquidity position with over $248 million in cash investments and receivables.

Restructuring and development costs increased from the second quarter and up slightly year-to-date 2014 compared to the year-to-date 2013.

We expect these costs to continue to increase into the future as we reached an initiated Phase III development and NBI-98854 and tardive dyskinesia as well as the first clinical trial of our VMAT2 inhibitor in Tourette’s syndrome.

Additionally, our research team has been advancing other compounds through the development continuum on the cost of we will incur moving these product candidates and elements or certainly further increase the R&D expense line.

General and administrative costs increased slightly in the third quarter mainly driven by market research costs related to our TD and Tourette’s syndrome program. After reviewing the market research and preparation necessary for commercialization of NBI-98854 into tardive dyskinesia, we made the decision to move certain activities forward into 2014.

This work was originally scheduled for early 2015. Because of this, our general and administrative expenses will be slightly higher than previously anticipated and should approximate $17.5 million for the full year.

We continue to plan to end 2014 with a strong financial position with an excess of $230 million in cash and investments at the end of the year. For those looking for additional details in the quarter, we plan to file our 10-Q tomorrow morning. And again, this is a relatively straight forward quarter conducted to plan.

I’d be happy to answer any questions on the financials in the Q&A section of the call. But for now, I’ll turn it back over to Kevin..

Thank you, Tim. And once again giving all the numbers, there is no surprises there. There shouldn’t be any surprises to anyone there. And as Tim explained we are in the process as you expect for gearing up going in the late stage trials with 98854. So, Chris, could you give us an update on the progress please..

Absolutely. I’ll talk about both the Elagolix and VMAT2 programs. The Elagolix program as everyone is well aware is in the good hands of AbbVie. And we are anticipating completion of the placebo controlled portion of the first pivotal trial later this month.

The last subject will finish a week – either month six, a visit prior to the roll-over into the extension phase. AbbVie will then be in the process of cleaning QA QC process of that data in the month of December. And we anticipate a look at top-line results for the Violet Petal Study in early part of January.

As you know, the second Phase III study which is a more global study in improvement sites is ongoing and an update on that trial will come later in 2015. They are also continuing the Phase IIb uterine fibroids trial, and we anticipate an update from AbbVie in 2015 as well.

So obviously the big news there is these very large trials are moving ahead as planned and we look forward to top line results in the very near future. Close to home and obviously what we are spending our time working on is the VMAT2 program both for tardive dyskinesia and for Tourette’s syndrome.

As Kevin mentioned, we’ve made very good progress in that regard. We had very successful investigative meeting a few weeks ago for the Tourette’s syndrome Phase Ib trial, this is our first foray with 98854 into the adolescent and pediatric population, as the target population for Tourette’s syndrome.

And we had a terrific meeting with approximately 10 investigators and their teams reviewing the protocol and getting ready to start the streaming process has actually begun. And we’ve had actually initial dosing in that trial.

So, I’m very pleased at the start of this program as I said, the first time this molecule has been in the pediatric population. The investigator meeting for the Kinect3 Study occurred just about two weeks after the Tourette’s syndrome study.

And at this trial we had more than 200 personnel from the Kinect3 trial including 70 investigator sites and their teams and the Neurocrine members, we had a very productive meeting. I have to say, I participate in lot of investigator meetings over the years, this was a very, very engaged, very enthusiastic group of investigators.

They understand the importance of doing clinical research in tardive dyskinesia. And they also are very happy to be part of such a well-designed trial and such an important study for patients with this movement disorders. So that, investigator meeting went well. Screening process has begun.

And we are already well on our way to seeing TD patients go through the screening mechanisms that we have, ensuring that we have very appropriate patients with this trial. Our goal is to have all 70 sites up and running and screening patients by end of year. And we’re well on our way to meeting that goal.

The expectation is that the improvement process will take us into mid-year next year obviously I don’t have numbers I can give you today. We want to get a handle on how our treatment is going into early part of next spring before we could have a little more confidence about the timelines in that regard.

But this start is any indication, we’re very pleased with our progress. Perhaps even more exciting for us than initiating the Kinect3 study and initiating the P4 study in drugs is a hard work that was done resulting in the designation of breakthrough therapy.

As Kevin mentioned, we’re very excited to receive this notification from the FDA, I guess it was just last week confirmed. And we had applied for this a few months ago. The breakthrough therapy typically has been designated for compounds and hematology and oncology. There have been a few other areas with not much in the neurology and psychiatry space.

And so we were very pleased that the FDA not only acknowledged the importance of tardive dyskinesia as a serious unmet medical need but is important some breakthrough designation means that gives us a greater access to senior members of the FDA team. It involves people from offices, new drugs not just a review division.

And we have a series of interactions, all designed with one expressed purpose that is to help this development program move as quickly as possible to NDA and ideally to approval.

So, this allows us to have more frequent communication, better quality communication, ways of trying to remove roadblocks and obstacles and prevent surprises that would interfere with this NDA getting approved.

And so we’re already in the process now of working with the team members at the FDA, we will participate in this series of interactions and conversations. And we like to really take off the table any potential hiccups before we get to the NDA and increase the profitability of successful review and approval. So, we’re very excited about this.

Obviously breakthrough therapy designation is a relatively new pathway that the FDA has had to serve along the two years I believe. And this was something that again reinforces the fact that the FDA is serious about tardive dyskinesia and serious about helping with this development program.

So, our next interaction with the FDA around the breakthrough designation will be a type-D meeting in 2015, and I’ll give you some more color on that when we have more detail. So, very exciting, people are extremely busy. We have a very enthusiastic group of investigators for both Tourette’s and tardive dyskinesia.

And I will keep you updated as the improvement process goes along. So, Kevin, I think I’ll turn it back to you..

Thanks Chris. So, why don’t we go straight into questions now so that we can answer anything – any of the questions that you may have..

(Operator Instructions). And we’ll take our first question from Robyn Karnauskas from Deutsche Bank. Please go ahead..

Hi, this is Mohit for Robyn. Thanks for taking my question and congratulations on the progress. So my question is regarding the newly acquired breakthrough designation.

Did you expect any changes in terms of timing of the filing and the amount of data you might need for the submission because of the breakthrough designation? And then I have a follow-up. Thanks..

Mohit, thank you for that. So, as you know, we have planned or anticipated NDA filing in late 2016. I don’t see that changing radically.

As I said, I think the main benefit for us at this stage since we’re already in Phase 3 is that any of the other things that become potential hurdles or roadblocks at the time of NDA, we can deal with addressed manage in advance of the NDA filing.

Now, there are some potential benefits that we might take advantage of that could help from a timing point of view, but until I have that type B meeting, I really won’t be able to get any further clarity. I mean, we already had fast-track designation and so we’ve already had a very successful end of Phase II meeting.

We already have achieved success in that. We have one pivotal Phase III trial instead of – and the Kinect2 is potentially stands in adequate and well controlled trial, i.e. a pivotal trial. We already have fast-track, already gives us the opportunity to have rolling submission of NDA.

So, things are moving quickly whether I can move it or even a little faster and whether at the time of we get closer to the NDA, whether the FDA themselves are interested in prior to your review. That remains to be seen. Obviously we like to do all of those things as we can but like now it’s still 2016 NDA..

Great, that’s helpful. And then, one more follow-up if I may. So, regarding the Tourette’s study, we understand that there is no placebo arm. Could you please help us understand how you would be looking at the data once they are available in 2015? What would help you make a good noble decision at this stage? Thanks..

Thank you. Couple of interesting points around this. This Phase Ib study is a safety tolerability and PK study. And it’s designed in such a way that we built in adolescence first, there was very conservative go through and when that was well tolerated, then we go to the younger pediatric children.

And then we move up to next dose in the adolescence and then the next dose in the younger children and we work our way through. It is designed not as an efficacy study, there is no placebo. We are using pharmacodynamic assessments, i.e. get rating scale.

And I wouldn’t be surprised that as we move up in dose, if we see some impact on the rating scale but we are not using this study as a go no go study for efficacy. We know mechanistically that VMAT2 inhibition is successful in reducing ticks. So this study is not designed to answer that question.

The next trial will be a, trial where we go into this study with doses that we know are in the right range to suppress ticks and if a longer duration trial that will be designed to address the efficacy study. But in this early study you won’t see us making a go-no-go decision based on efficacy.

It will be purely on safety and PK used for dosing trials and in subsequent trials..

Great. Thanks and congratulations once again..

Thank you..

Thank you..

And we’ll take our next question from Charles Duncan of Piper Jaffray. Please go ahead..

Hi guys. Thanks for taking the question and let me add my congratulations on the breakthrough therapy designation. And a quick question regarding I guess tardive dyskinesia versus Tourette’s versus Huntington’s and clearly the breakthrough therapy designation points to unmet need in tardive dyskinesia.

But what do you think about the clinical value in-charge on it versus and perhaps the pricing paradigm, so it could exist versus Huntington’s or Tourette’s more orphan disease type indications?.

Well, let me address a couple of those points. You are in correct in that chorea associated with Huntington’s disease is orphan disease. You are not correct in that neither tardive dyskinesia not Tourette’s are orphan.

That while years ago, both were considered orphan conditions, they no longer are the epidemiology of tardive and the epidemiology of Tourette are that they are considerably more prevalent. So, there at least 500,000 if not close to 800,000 people with tardive dyskinesia in the U.S.

And Tourette’s, it’s in the 400,000 to 600,000 are ranged depending on the literature and how you want to talk about the epidemiology. So neither of those are tardive. Now, from a clinical meaningful point of view, we know that reduction in tardive dyskinesia and reduction in tick tends to be frequency severity that is very impactful on patient lives.

And I can say this now as a movement disorder neurologist I can tell you that treating Huntington’s patients treating TD patients, treating tick patients that magnitude of improvement and the magnitude of impact on patient lives is very similar and in some ways you have to say that for a life-long condition like tardive dyskinesia.

Or in an adolescent condition with for example severe ticks interfering with school education and social innovation that of children, in some ways TD in TS are more impactful than reduction of Tourette’s and Huntington’s patients. So, we think this is the fact that it got breakthrough therapy designation.

I think reflects the importance that not only we put on this but the FDA does as well..

And Charles, from the standpoint of pricing that you brought up today are certainly one sees that in orphan conditions and such as Huntington’s career, drugs cost most in that disease state and what we would be charging for the other much larger indications.

But as we said before, we haven’t done any formal pricing research yet, so there is not a whole lot that we can say about pricing at this point..

That makes sense because then I figured that was the case. But let me ask you one question. Chris one additional question, Chris did mention I don’t think he used the word quality of patients but you did allude to that for the tardive study being important for success or certainly gave K2 an advantage over K1.

I guess, what are you mostly concerned about in terms of enrollment, is that adherence to the enrollment criteria or say keeping the right kind of safe involved or what is it for tardive?.

Well, before Chris answers that in some detail, I would just like to say that for Kinect1 and Kinect2, we got exactly the patient population that we wanted to get. I think our learning is on enrollment we’re done in the two previous Phase IIa studies.

And again point why we spend time in Phase II so that we know that we’ve got things nailed down in Phase III.

But Chris, you want to?.

Yes, let me, just stepping aside, Kevin very nicely answered that. The patients that we’re recruiting for Kinect were virtually identical to the patients we recruited to Kinect2 with a difference was the blinded central radars in Kinect2 versus the site raters in Kinect.

And in fact as I said before, when we had the blinded central raters, go back and score the blinded randomized videos from Kinect, we showed that 854 worked very nicely in Kinect. And even at the low dose of 50 mg.

And so, again the patient quality was good in those two trials and we will do the exact same thing in Kinect3 and our open label one-year safety trial. We use a screening process that assures that these subjects have moderate or severe type of dyskinesia.

We find that is necessary because there are other confounding things, other drug induced movement disorders that sometimes get misdiagnosed as tardive dyskinesia. And you don’t want those subjects to these trials..

Perfect. Thanks for the added color guys..

Thanks Charles..

Thanks Charles..

And we’ll take our next question from Ian Somaiya of Nomura Securities. Please go ahead..

Yes, just a quick question on the VMAT program, and then maybe switch over to elagolix.

How should we think about the sales force and the marketing effort for TD versus Tourette’s, or any other indications you might choose to pursue? And how much overlap is there?.

Yes, Ian, thanks for the question.

We would envision that the sales force that we would be putting in this place in this for TD is going to be hitting neurologists, movement disorder specialists than those centers, and high influencing, high prescribing psychiatrists and then broadening that sales force out over going more for the community psychiatrist.

The treating submission is very similar for TD from the psychiatrist standpoint. But we haven’t – we’ve done beginning this works on sizing the sales force into TD which is approximately 150 field force reps. But we haven’t begun that process and looking at the degree of overlap for Tourette’s at this point..

Okay. And just on elagolix, we all understand that your partner is running the program here.

Can you share with us your thoughts on what you would consider to be good data, and what ultimately the goal was for your partner evaluating a higher dose in the phase III trial?.

I think taking the second question first, I’m not sure that any major pharma would take just one dose until Phase III program, especially one as large as this. And so, we had studied exhaustively 150 mgs and some clearly that’s one of the doses. We had also studied other higher doses and so AbbVie in 3K, yet a second dose forward.

And I think that’s just being a good steward with the program and the drug in order to obviously be able to get as many bites of the apple as possible for efficacy and even safety with this.

What do we see is a success, I think as we said many times that the studies are way over powered for efficacy and based on what we saw in our last Phase II study that we did with the drug and the Daisy Petal study.

So, what AbbVie will be disclosing we anticipate is going to be key values both for the primary employee at month three and then for the key secondary employee at the end of the placebo controlled trial at month six.

And that these each have to hit a point 0.25 and so we see that success was going to be hitting those key values and thus having a well-tolerated drug at the same time..

Ian, this is Tim. You’re aware that there is a second Phase III going on the solstice study and for multiple reasons AbbVie and rightfully so is going to be little on disclosure until that second study completes out. So, we’ll be sharing the results as Kevin mentioned on a group basis. They wouldn’t have un-blinded at the patient level basis yet.

And again, the coprimary end points would be shared. And as far as safety we’ve been getting a lot of questions around what the safety disclosure is going to look like.

Are we going to see a table like we normally see from a Neurocrine type release, and you’re not going to see that will be a general overall comment around the safety and the conduct of the study. And then obviously a lot more details were released in future scientific meetings and then after the entire Phase III programs completed.

And then the other question is around bone, and that data for bones people asking about what are we going to know about six-month bone data and what we can tell you. We’ve already shared the six month bone data with The Street as we lowered the six and three study.

And that’s with six-month bone data has minimal impact on 150 mgs out of the six months. The one year bone data won’t be shared until both studies are complete, because they will take out population to pull them and then share that analysis at that point..

I guess the question is, if they were to extrapolate the higher dose and what impact it might have on bone?.

That will run the trial..

Yes, that will be in the data..

Okay. Thank you so much..

Thank you, Ian..

(Operator Instructions). And we’ll take our next question from Phil Nadeau of Cowen & Company. Please go ahead..

Good afternoon. Thanks for taking my questions. First, just a follow up to Ian’s question on what’s going to be disclosed with the top line results.

I guess first, will the magnitude of the end points be disclosed or will it simply be the P values? We’ve been speaking with AbbVie’s Tim has been actually leading that or speaking with AbbVie for quite some time now. And really it goes to what Tim said they want to be able to disclose enough to give people a good sense of how the trial turned out.

And we obviously hope positive. But at the same time their weighing that against they have an ongoing trial that they do not want to buy us..

Okay. So if I understood your response to Ian’s question, we’ll basically get three things, the P value on a three month end point, P value on a six month end point, and then a qualitative description of the safety.

Is that right? Or is there anything else that you expect to come out with the top line results?.

There may be some more color around it but that’s basically what we’re expecting at this point..

Okay.

And then on the efficacy, it sounds like the three month data and the six month data are actually co-primary end points?.

That’s not been announced..

No. Okay..

So, Phil the co-primary end-points are dismal area and non-menstrual pelvic pain. And one of them has to hit at a point at month-three at 0.25..

I see, okay..

And then month six, which is still placebo controlled out to six months, that’s a secondary end-point to show that you have the maintenance of that response..

I see. So when you said both have to be hit, I thought you meant three and six months. But it’s actually both end points at three months..

I misspoke, if I said months three, both of the end-points have to hit out month three..

Okay, great. That clarifies things, that’s how I thought it was which is why I was confused. That’s very helpful. Then second on the uterine fibroid data that AbbVie is going to hopefully release in the second half of next year.

I know, Tim, you had said you were also in discussions with AbbVie about the quality and quantity of data that would be released from the phase II B.

Have those discussions completed, or do you still continue to negotiate?.

No, we’re still working through those right now Phil, as you know there is – AbbVie has got a lot of stuff on their plate right now. They’ve got couple of big events coming between now and the end of the year, one of them being our elagolix data.

And so what we’ve decided to do is just table that discussion until later this year or early next year and then we start talking about that..

Okay..

We should be able to give you an update by your conference..

Okay, great.

Then one just on the VMAT Tourette’s program, what risks should we be considering as you move the VMAT into adolescents and pediatric patients? Are there new side effects that we should be concerned about, and I guess maybe specifically has tetrabenazine been used in the pediatric population, and what showed up in those trials?.

So, the kinds of risks that we want to expect VMAT2 inhibition in adults are very similar to what you’d expect in kid. If you go up on the dose you get sedations, trouble concentrating, akathisia that is motor restlessness. So those would be the main things that one would see that doses in the upper range of clinically relevant doses.

In my experience as a neurologist, treating children with Tourette’s using off-label tetrabenazine, you don’t see anything unusual. Although, it’s very difficult to make a truly accurate statement because careful well controlled, placebo controlled trials of tetrabenazine and Tourette’s have not been done.

And so, you’re only looking at kind of open label experience and anecdotal test reports and that sort of thing. But I’m not I don’t think there is a unique set of risks in the pediatric population. I think the risks are very similar to adults. We’re starting at very conservative period of low doses in our trial.

And the foundation of our entire 854 program is about having a very safe and well-tolerated drug..

Okay. And while we’re talking about risks, you had mentioned potential hiccups that you want to get out of the way through your discussions with the FDA with the breakthrough designation.

What could some of those hiccups be? My impression from your comments, are that you’re very happy with the trial design that came from a productive meeting with FDA, so it’s nothing do with the trial.

What are some of the hiccups that you referred to?.

Yes, there is a whole list of the generic kinds of hiccups that one, sometimes is surprised with as you have a NDA file. There are CMC, manufacturing issues that there may be a new member of the review team who has a particular concern about a certain manufacturing method or how data is documented during the certification and release process.

It may be in the pre-clinical arena, there may be a way of interpreting how the histopathology is analyzed, and did the pathologists who were studying the rodent and the dog and histopath, did they use the right stains to show neurite formation in brain.

I mean those types of things you just want to make sure you’ve talked all of those things in advance. In addition there, on the clinical end there are things that I want to have a chance to tee-up before we get there. And there are things like we have a patient reported outcome tool that we’re developing. So that’s unique for tardive dyskinesia.

I would love to be able to have some more in-depth conversations with the FDA before the NDA, because this is a tool that I think is going to generate additional data from our Kinect3 study. And I’d love to be able to talk about that in the post approval world as even potentially a claim. And so we want people to tee-up, have that conversation.

I’d like to know in advance is there are specific topics that members of the review team have a personal position on. So as you know, in this day and age, every NCE, especially if it’s for an indication that has that we had an approval before, goes through an Advisory Committee.

I’d like to know what are those hot button topics that might be there at the review team level that could come up at the Advisory Committee? And I’d like to be able to plan for that, to be able to address those well in advance rather than having a surprise. It’s those kinds of things..

That makes a lot of sense. Just one final question, back to the first one I asked just to make sure I’m clear. So when we see top line data, we’re going to get actually four P values, the two P values for the three month data, the two P values for the six month data, and then some qualitative statement on safety.

Is that correct?.

Yes, that is correct..

Okay. Perfect. Thanks for taking my questions..

Thank you, Phil..

And at this time we have no further questions in queue. So I’ll turn the program back over to Mr. Gorman..

Thank you very much. Chris has spoken quite a bit and you guys have rightfully been interested in the breakthrough designation that we’ve received.

And really what it does is breakthrough designation along with many other initiatives that the agency has taken on over the last several years has been as Janet Woodcock has said, to increase communication so that there is more transparency between the division and the sponsor.

And really that’s what we feel as the main power of getting that breakthrough designation. And the bottom line is that with increased communication we’re going to minimize the opportunity for surprises after our NDA submission.

And basically getting this truly does de-risk the program quite a bit from that standpoint and there’s where the main value of getting this breakthrough designation from the FDA, getting this breakthrough designation stems from.

We look forward to talking to you in the coming weeks and months about more of this as we have more communication with the FDA into this process. So, I’d like to close with a couple of things.

Number one, I know we’re getting late in 2014, but I remain still very hopeful that we are going to be able to put another new program into the clinic here at Neurocrine.

And in addition, 2015 is going to be a year where all of the efforts from 2014 start coming to fruition is going to be very data rich, starting early in January with the AbbVie’s announcement of the first Phase III in endometriosis.

And then in the second half of the year, we’re going to get both the Phase IIb in uterine fibrates and also in that second half of the year, you can anticipate getting the top-line Phase III data from our TD trial. In addition, the AbbVie, we believe it’s on track should we complete the second Phase III by year-end of next year in endometriosis.

And we will have the data from the Phase Ib and Tourette’s as Chris had said. We are taking efficacy measures there, the true powers of that study is going to tell us if our drug is safe and well tolerated in predictable pharmacokinetics in order to take it into the larger Phase II trials and then beyond at that point in time.

So, we’re going to be speaking this Thursday at the Nomura Conference in Boston. So, I look forward to being able to answer any more questions there. Thank you very much for your attention..

This concludes your teleconference for today. Thank you for your participation. You may disconnect at any time..