Jane Sorensen - IR Kevin Gorman - President, CEO Tim Coughlin - CFO Chris O'Brien - CMO.

Brian Skorney - Robert Baird Phil Nadeau - Cowen & Company Charles Duncan - Piper Jaffray Carter Gould - Barclays.

Good day and welcome to the Neurocrine Biosciences Reports First Quarter 2016 Results Conference Call. All lines are currently in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. Please note today's call is being recorded.

It is now my pleasure to turn the conference over to Kevin Gorman, President and CEO..

Thank you and good afternoon everyone. Today I'm joined by Chris O'Brien, our Chief Medical Officer, Tim Coughlin our CFO and [Technical Difficulty] Before we get started Jane could you please read our Safe Harbor statement..

Yes, good afternoon. I want to remind you of Neurocrine's Safe Harbor cautions. Certain statements made in the course of this conference call that state the company's or management's intentions, hopes, 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 Web site 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. As you all know this was a busy and exciting time for the company something that we've been looking forward to for a long time. We have three main goals in front of us and that take up the vast majority of our time throughout the rest of this year.

First and foremost in that is to putting together the highest quality of NDA valbenazine in tardive dyskinesia and not only plus putting together and submitting that NDA, but also having everything in place in order to fully support that NDA through the entire review to ensure a first cycle review on that.

Second, we're making the transition from purely R&D organization now over to a commercial organization. And that requires quite a bit of growth on our part although we're doing in a very measured way it is still nevertheless we are adding almost 90 people to the company this year. And that would not include a sales force which will be hired next year.

We can talk about that later perhaps in the Q&A. But, we are putting everything in place that's necessary in order to do the market education all pre-launch, all unbranded education that is going to be vital to having a good launch with the drug.

And then third, we're obviously paying attention and putting all the resources necessary to continue to move our pipeline along briskly and so we'll be talking about all three of those today. So what I'd like to do now is, I'd like to turn it over to Tim and he can talk about the financials for the Q1..

Great, thanks Kevin. Good afternoon everyone and thank you for joining us on our first quarter of 2016 earnings call. We had another very productive quarter on all fronts, initiating clinical trials in Tourette, AbbVie starting the Phase 3 program and uterine fibroids as well as reading at the second Phase 3 trial in Endometriosis.

We also on-boarded our medical science liaison team and are beginning to fill out our commercial teams. From a financial stand point, we ended the first quarter with almost $440 million in cash investment or receivables with very strong financial position.

Our loss for this quarter was $19.3 million or $0.22 per share, this compares to a loss of $1.2 million or $0.01 per share for the first quarter 2015. The main driver and the change of our financial results from the first quarter 2015 to that of 2016 was an increase in expenses both in R&D and in G&A.

Overall, R&D cost increased by $7.3 million quarter-over-quarter and this was primarily result of higher cost associated with our VMAT2 program. Costs related to clinical development of valbenazine increased by $4.7 million from 2015 to 2016.

Other external cost primarily related to preparing the valbenazine new drug application for tardive dyskinesia increased by approximately $1.6 million. In addition, we supplemented our headcount R&D over 2015 levels adding key regulatory CMC and clinical personnel over the past 12 months to manage our expanding pipeline.

This increased personnel related R&D cost by approximately $2.2 million was about half of this increase in personnel cost due to higher share based compensation cost. As expected, G&A cost increased significantly from the first quarter 2015 to this first quarter of 2016 up by $6.5 million.

The main driver of this increase was personnel related expenses which were up almost $4 million, $2.4 million of this increase related to share based compensation cost. The balance of the increase in G&A cost was driven by precommercialization activities related to valbenazine across our MSL marketing, health economics, payer access and sales groups.

Our overall increase in shares based compensation expense are approximately $3.3 million was primarily driven by higher Black-Scholes evaluations. For the second year in a row we have decreased the number of annual equity awards.

However, the increase in our stock price has yielded a significantly higher Black-Scholes value for these awards and as a higher non-cash share-based compensation expense for a lower number of rewards. Looking forward, we expect expenses to continue to increase in each quarter for the balance of 2016.

In R&D, we will continue to execute on our pipeline including completing the Phase 3 development of valbenazine for tardive dyskinesia completing our two Tourette studies of valbenazine and completing the single and multiple setting dose studies for our essential tremor program and getting the CAH back into the clinic with our backup molecule and bringing out another compound into the clinic.

In addition and most importantly our R&D team is intensely focused on completing the NDA for valbenazine and tardive dyskinesia. Our expenses for R&D should increase moderately throughout the rest of the year.

On the G&A front our medical science liaison team is fully functioning and out meeting with scientific leaders in both their offices and in major scientific meetings. Our marketing team has selected an NC record and they're preparing for a launch into tardive dyskinesia.

Our payer access team has been facing with major insurers preparing health economics and outcome reports and our sales team has begun laying the ground work for on-boarding of our field based sales force. The expenses related to G&A will increase significantly as this year progresses.

Our guidance at the beginning the year was for expenses to total at least $185 million and we are on track to reach that level. We expect steady growth through the balance of the year primarily on the G&A slide of the ledger.

During this quarter we received a $15 million milestone payment from AbbVie related to the starting of Phase 3 evaluation of Elagolix in Uterine Fibroid sets our sole revenue source for the quarter.

So in summary, this was a very strong quarter highlighted by excellent progress across all facets of the company and ending the quarter in an excellent capital position. So I'll conclude my prepared remarks here for those looking for additional details our Q is on file now and for now I'll turn it back over to Kevin..

Thank you, Tim. So, no surprises on the financials. We're making obviously all the necessary investment in valbenazine for as I said before a successful NDA review and also for a commercialization of the compound.

Very happy with our partner AbbVie, as Tim had mentioned with having the second Phase 3 read out very nicely positive, what I'll do now is turn it over to Chris and he can give you a brief update on the clinical programs and then after Chris, we'll go to Q&A..

Thank you, Kevin, and thanks to the listeners who are participating this afternoon. I think Tim did a nice job of summarizing the state of the clinical program. Kevin just mentioned the Elagolix program and our partnership with AbbVie. I think as people are well aware in addition to the positive Phase 3 results from the endometriosis trial.

There are two matched Uterine Fibroid trials, one in the U.S. one in North America over approximately 400 subjects each -- is a replicate trial, they mimic exactly what was done in the highly successful Phase 2b study and these programs are on track for Uterine Fibroid as a second indication.

I would put out something interesting about endometriosis, AbbVie is continuing to invest in the long-term growth and opportunity for this molecule as you know we had considerable experience at Neurocrine and then repeated by AbbVie with 150 milligram once a day dose of Elagolix for endometriosis.

In addition, AbbVie explored a range of other doses and dose regiments and decided to proceed also with the 200 milligram twice daily dose for Endometriosis.

And now they've recently announced through clinicaltrials.gov a Phase 3b study which is a long-term investment looking at some label enhancement opportunities that is 200 milligrams BID plus add back hormone therapy as a way of extending chronicity of use -- long-term use in the endometriosis population.

So very nice efforts on there, and obviously, very positive enthusiastic comments from the CEO of AbbVie, recently at his presentation about the long-term opportunity for Elagolix. Also going on in our programs as Kevin and Tim mentioned, we have completed the single ascending dose, Phase 1 trial and healthy volunteers for central tremor.

We're just finishing up that data analysis now. And we're in the planning stages for kicking-off the multiple ascending dose trial, if everything continues as planned. And as Tim mentioned our goal is to have that second Phase 1 trial in healthy volunteers read out by end of the year.

And we are making good progress also with the back up molecule for the congenital adrenal hyperplasia program with the goal of having this new IND around the end of the year.

So those programs are doing well and in fact just this morning we finished our research review meeting reviewing the dozen or so early discovery phase and preclinical phase programs.

So there is a lot of activity obviously we don't talk about each of those programs publicly, but there is an intense amount of work going on, on a range of primarily CNS indications that we're quite excited about really normal innovative kinds of technologies. So let's jump now to the focus of our efforts as Tim mentioned and Kevin mentioned.

All our resources, all hands on deck everybody is working on valbenazine with the goal of the NDA for tardive dyskinesia and advancing the Tourette syndrome programs. So let's just quickly go through those. I'll remind people the Kinect 3 study was the final piece of placebo control data that read out top-line data in the fall.

And then was just presented at the plenary session by Dr. Hauser at the American Academy of Neurology Meetings in Vancouver.

This was very well received, highly positive data in terms of efficacy and generally well tolerated with favorable safety profile from that specific trial and so this data is now going into manuscript, which is the graph form now additional looks at that Kinect 3 data will also be presented at the upcoming American Psychiatric Association meeting to be held in Atlanta within two weeks time, I'll come back to that in a moment.

So that Kinect 3 study had an extension phase which allowed patients to continue on valbenazine through one year that is winding down and interestingly a number of subjects and investigators who had done well were very reluctant to go off valbenazine, but because the trial was over they really had no options.

Hence we opened what we call the roll over study, the 1506 trial and you can see that posted on clinicaltrials.gov that's simply an opportunity for subjects who had participated in Kinect 3 or Kinect 4 to be able to continue to have access to this investigational medication up to the time of commercialization if things continue to go well.

In parallel, the open label one-year safety study, the Kinect 4 study is also ongoing as you know we closed enrollment to that study at the beginning of the year and that's ongoing. I will point out, I frequently get asked are these weight limiting steps, do we have to complete these trials for the NDA filing and the answer is no.

We expect to continue to have subjects in these extension phase of these studies and the roll over study at the time of the NDA filing.

In addition, we continue to have the data safety monitoring board that is the independent group of physicians, DSM-V continue to look at safety data and advise Neurocrine as to any potential safety signals or things that we need to be concerned about and that is an ongoing process that continues to go well and we still have their recommendation to proceed.

So I think as people are well aware we had three presentations at the American Academy of Neurology in Vancouver, the Kinect 3 study was the first roll out of more detail than we had done in our press release.

And then, we also had additional information about long-term observations both safety and efficacy observations from the 12 week Kinect 2 study and nice presentations by Dr. Factor and Dr. Bari at AAN, so that has gone well.

Those were very well received and we are now getting ready to see the APA presentations and it turns out just about an hour ago the APA released the titles of the various posters and presentations that will be shown at the Atlanta APA meeting.

We have four presentations some additional looks that the Kinect 3 data, particular things that are of interest of psychiatrist namely comorbid psychiatric conditions and some customs of data.

We also have additional looks at the impact of valbenazine on dyskinesia by underlying disease, by underlying disease severity, by concomitant medications, for example were they on typical antipsychotics or atypical antipsychotics. So there are a lot more insight into kind of the sub-analysis that are going on.

Obviously, a lot of that work goes to inform the NDA and we look forward to sharing that with the psychiatric community on this -- the 17th and 18th. We also will be presenting some Kinect 3 data at the Movement Disorder Society meeting the International Parkinson's Disease Congress that will be coming up in June in Berlin and Dr.

Factor will be presenting there and we will have presence just as we had at AAN and we'll have at APA, we'll also have attendance at MDS with our MSL and medical director's presence there as well.

So very exciting group of things going on in the first half of the year, obviously, we have some other abstracts and manuscripts planned for later this year and I'll keep you updated on those as we go. NDA preparation is on track for this year and everybody is very diligent in that aspect. The Tourette syndrome program is also on track.

We have the T-Force GREEN as the Phase 2 trial in children and adolescents and that is actively recruiting and enrolling subjects and we're very pleased with how that's going. And the T-Force study which is the Phase 2 trial in adults with Tourettes both are 90 subject placebo controlled trials and very pleased with those status.

I still don't have kind of detailed color for you on when they're going to read out.

We're in that early phase of enrollment where there is kind of you expecting the up tick to occur during the summer or so as we get a little further along in the year we'll have a little more color on which one we think will read out first and is it before end of the year or after end of year, but we're still looking for turn of year kind of read out.

As was mentioned, the Medical Affairs Group is building out, we have hired some really outstanding Medical Science Liaisons, these are MDs, PhDs and PharmDs that have considerable experience in the CNS neuroscience arena and they are currently meeting with their regional scientific leaders and helping us as we go to these scientific meetings with disease state education.

So lots of work, lots of things going on very exciting, the energy level here at Neurocrine in San Diego and our regional group is fantastic. As Kevin mentioned this is an exciting time and we're looking forward to the rest of 2016 has to offer. So, Kevin, I'll turn it back to you..

Thank you, Kevin, and thanks to the listeners who are participating this afternoon. I think Tim did a nice job of summarizing the state of the clinical program. Kevin just mentioned the Elagolix program and our partnership with AbbVie. I think as people are well aware in addition to the positive Phase 3 results from the endometriosis trial.

There are two matched Uterine Fibroid trials, one in the U.S. one in North America over approximately 400 subjects each -- is a replicate trial, they mimic exactly what was done in the highly successful Phase 2b study and these programs are on track for Uterine Fibroid as a second indication.

I would put out something interesting about endometriosis, AbbVie is continuing to invest in the long-term growth and opportunity for this molecule as you know we had considerable experience at Neurocrine and then repeated by AbbVie with 150 milligram once a day dose of Elagolix for endometriosis.

In addition, AbbVie explored a range of other doses and dose regiments and decided to proceed also with the 200 milligram twice daily dose for Endometriosis.

And now they've recently announced through clinicaltrials.gov a Phase 3b study which is a long-term investment looking at some label enhancement opportunities that is 200 milligrams BID plus add back hormone therapy as a way of extending chronicity of use -- long-term use in the endometriosis population.

So very nice efforts on there, and obviously, very positive enthusiastic comments from the CEO of AbbVie, recently at his presentation about the long-term opportunity for Elagolix. Also going on in our programs as Kevin and Tim mentioned, we have completed the single ascending dose, Phase 1 trial and healthy volunteers for central tremor.

We're just finishing up that data analysis now. And we're in the planning stages for kicking-off the multiple ascending dose trial, if everything continues as planned. And as Tim mentioned our goal is to have that second Phase 1 trial in healthy volunteers read out by end of the year.

And we are making good progress also with the back up molecule for the congenital adrenal hyperplasia program with the goal of having this new IND around the end of the year.

So those programs are doing well and in fact just this morning we finished our research review meeting reviewing the dozen or so early discovery phase and preclinical phase programs.

So there is a lot of activity obviously we don't talk about each of those programs publicly, but there is an intense amount of work going on, on a range of primarily CNS indications that we're quite excited about really normal innovative kinds of technologies. So let's jump now to the focus of our efforts as Tim mentioned and Kevin mentioned.

All our resources, all hands on deck everybody is working on valbenazine with the goal of the NDA for tardive dyskinesia and advancing the Tourette syndrome programs. So let's just quickly go through those. I'll remind people the Kinect 3 study was the final piece of placebo control data that read out top-line data in the fall.

And then was just presented at the plenary session by Dr. Hauser at the American Academy of Neurology Meetings in Vancouver.

This was very well received, highly positive data in terms of efficacy and generally well tolerated with favorable safety profile from that specific trial and so this data is now going into manuscript, which is the graph form now additional looks at that Kinect 3 data will also be presented at the upcoming American Psychiatric Association meeting to be held in Atlanta within two weeks time, I'll come back to that in a moment.

So that Kinect 3 study had an extension phase which allowed patients to continue on valbenazine through one year that is winding down and interestingly a number of subjects and investigators who had done well were very reluctant to go off valbenazine, but because the trial was over they really had no options.

Hence we opened what we call the roll over study, the 1506 trial and you can see that posted on clinicaltrials.gov that's simply an opportunity for subjects who had participated in Kinect 3 or Kinect 4 to be able to continue to have access to this investigational medication up to the time of commercialization if things continue to go well.

In parallel, the open label one-year safety study, the Kinect 4 study is also ongoing as you know we closed enrollment to that study at the beginning of the year and that's ongoing. I will point out, I frequently get asked are these weight limiting steps, do we have to complete these trials for the NDA filing and the answer is no.

We expect to continue to have subjects in these extension phase of these studies and the roll over study at the time of the NDA filing.

In addition, we continue to have the data safety monitoring board that is the independent group of physicians, DSM-V continue to look at safety data and advise Neurocrine as to any potential safety signals or things that we need to be concerned about and that is an ongoing process that continues to go well and we still have their recommendation to proceed.

So I think as people are well aware we had three presentations at the American Academy of Neurology in Vancouver, the Kinect 3 study was the first roll out of more detail than we had done in our press release.

And then, we also had additional information about long-term observations both safety and efficacy observations from the 12 week Kinect 2 study and nice presentations by Dr. Factor and Dr. Bari at AAN, so that has gone well.

Those were very well received and we are now getting ready to see the APA presentations and it turns out just about an hour ago the APA released the titles of the various posters and presentations that will be shown at the Atlanta APA meeting.

We have four presentations some additional looks that the Kinect 3 data, particular things that are of interest of psychiatrist namely comorbid psychiatric conditions and some customs of data.

We also have additional looks at the impact of valbenazine on dyskinesia by underlying disease, by underlying disease severity, by concomitant medications, for example were they on typical antipsychotics or atypical antipsychotics. So there are a lot more insight into kind of the sub-analysis that are going on.

Obviously, a lot of that work goes to inform the NDA and we look forward to sharing that with the psychiatric community on this -- the 17th and 18th. We also will be presenting some Kinect 3 data at the Movement Disorder Society meeting the International Parkinson's Disease Congress that will be coming up in June in Berlin and Dr.

Factor will be presenting there and we will have presence just as we had at AAN and we'll have at APA, we'll also have attendance at MDS with our MSL and medical director's presence there as well.

So very exciting group of things going on in the first half of the year, obviously, we have some other abstracts and manuscripts planned for later this year and I'll keep you updated on those as we go. NDA preparation is on track for this year and everybody is very diligent in that aspect. The Tourette syndrome program is also on track.

We have the T-Force GREEN as the Phase 2 trial in children and adolescents and that is actively recruiting and enrolling subjects and we're very pleased with how that's going. And the T-Force study which is the Phase 2 trial in adults with Tourettes both are 90 subject placebo controlled trials and very pleased with those status.

I still don't have kind of detailed color for you on when they're going to read out.

We're in that early phase of enrollment where there is kind of you expecting the up tick to occur during the summer or so as we get a little further along in the year we'll have a little more color on which one we think will read out first and is it before end of the year or after end of year, but we're still looking for turn of year kind of read out.

As was mentioned, the Medical Affairs Group is building out, we have hired some really outstanding Medical Science Liaisons, these are MDs, PhDs and PharmDs that have considerable experience in the CNS neuroscience arena and they are currently meeting with their regional scientific leaders and helping us as we go to these scientific meetings with disease state education.

So lots of work, lots of things going on very exciting, the energy level here at Neurocrine in San Diego and our regional group is fantastic. As Kevin mentioned this is an exciting time and we're looking forward to the rest of 2016 has to offer. So, Kevin, I'll turn it back to you..

Thanks Chris. I think as Chris has said too and its nice that the title of all of the presentations that we have at APA are out now, between AAN and APA really are Phase 2 and Phase 3 program as they fair to you in tardive dyskinesia and we're very happy to have all that data out there. So why don't we open up the lines now for questions..

Thank you. [Operator Instructions] We'll take our first question from Brian Skorney from Robert Baird. Please go ahead..

Hey, good afternoon, guys. Thanks for taking the question.

Two quick ones, I guess you mentioned on the call that the Kinect 4 is not a gating factor for NDA filing, so I was just wondering if you could quickly review what we should see as the gating factors for NDA filing at this point? And then from the Kinect 3 data set, I was just wondering I know in the presentation at AAN, there was mentioned, there is no impact on suicidality, I was just wondering did you implement the Columbia suicidality scale and Kinect 3 is a measure at all and can we expect to see that at some point?.

So, yes. Indeed, we used the Columbia Suicidality Scale in fact as a general rule you can assume that the FDA requires you to use it for all Phase 2 and Phase 3 studies and even some Phase 1 studies now particularly repeated dose studies. So, we've had the Columbia as part of every Phase 2 and Phase 3 study that we've done.

So that's obviously a critical piece. The second point, you'd asked about the timing, so yes the Phase 4 Kinect 4 study is, sorry, Phase 3 Kinect 4 study is not rate limiting, the primary things that affect the timing of the NDA submission that we needed a certain number of subjects treated through a year and we have to get that number.

We haven't disclosed that number. But, suffice it to say that that piece and then all the work that goes into having an integrated safety and integrated efficacy analysis from all the trial is a massive undertaking completing all the reports completing all the CMC work.

I think as Kevin had mentioned before one of the main challenges faced particularly by small biotechs is when they submit an NDA. If they don't get an approval, the reason for the approvable letter is CMC problem and so we are being very diligent to make sure that all those pieces are done correctly before our submission is complete..

So, yes. Indeed, we used the Columbia Suicidality Scale in fact as a general rule you can assume that the FDA requires you to use it for all Phase 2 and Phase 3 studies and even some Phase 1 studies now particularly repeated dose studies. So, we've had the Columbia as part of every Phase 2 and Phase 3 study that we've done.

So that's obviously a critical piece. The second point, you'd asked about the timing, so yes the Phase 4 Kinect 4 study is, sorry, Phase 3 Kinect 4 study is not rate limiting, the primary things that affect the timing of the NDA submission that we needed a certain number of subjects treated through a year and we have to get that number.

We haven't disclosed that number. But, suffice it to say that that piece and then all the work that goes into having an integrated safety and integrated efficacy analysis from all the trial is a massive undertaking completing all the reports completing all the CMC work.

I think as Kevin had mentioned before one of the main challenges faced particularly by small biotechs is when they submit an NDA. If they don't get an approval, the reason for the approvable letter is CMC problem and so we are being very diligent to make sure that all those pieces are done correctly before our submission is complete..

Great, thanks..

Thank you. We'll take our next question from Phil Nadeau from Cowen & Company. Please go ahead..

Good afternoon. And thanks for taking my question. And congratulations on all the progress. First question Elagolix, I believe that have these in the process of doing some long-term follow-up on bone mineral density changes.

Can you remind us what the structure of those analysis are and also if you have any clarity on how have you might release the data without that?.

Yes. Thanks Phil. So, I just -- I'm not quite sure what you meant by structure of the analysis. But I think as you remember, the women in the two Phase 3 endometriosis trials had the first six months were placebo controlled, second six months were active and then a year post treatment was available to capture DXA scan to look at BMD.

And so that analysis that kind of those follow-up imaging studies are being done. So they'll be looking at DXA data up to one year post treatment.

The main thing they're looking at is, if there were women who had a reduction in BMD on the DXA during the scan of the one year study, they want to see -- how long does it take before they bounce back to the baseline if they had that.

And as you recall, what we had reported in our Phase 2 studies looking at DXA with 150 milligram once daily dose of Elagolix.

In general, we're looking at 0.3% to 0.7% reduction in BMD, so really minor changes and that was replicated by AbbVie at that dose and seeing slightly a greater dose related reductions in BMD at their higher dose 200 milligram BID and they will be obviously tracking that what that full data set to go into that NDA. So that's what the analysis is.

The FDA has typically been interested in not so much to mean change in BMD, but they want to look at is, what are the percentage of outliers, are there subjects that had clinically significant reduction in BMD. I think as you maybe aware DXA scans are not very precise that for an individual women the accuracy of a scan is plus or minus 3%.

So when we're talking about these small changes, you can't really talk about really being clinically meaningful what the FDA wants to see is, who are the outliers, are there women who had 5% reduction, 8% reduction, 10% reduction that sort of things. So that will be put into their package..

Yes. Thanks Phil. So, I just -- I'm not quite sure what you meant by structure of the analysis. But I think as you remember, the women in the two Phase 3 endometriosis trials had the first six months were placebo controlled, second six months were active and then a year post treatment was available to capture DXA scan to look at BMD.

And so that analysis that kind of those follow-up imaging studies are being done. So they'll be looking at DXA data up to one year post treatment.

The main thing they're looking at is, if there were women who had a reduction in BMD on the DXA during the scan of the one year study, they want to see -- how long does it take before they bounce back to the baseline if they had that.

And as you recall, what we had reported in our Phase 2 studies looking at DXA with 150 milligram once daily dose of Elagolix.

In general, we're looking at 0.3% to 0.7% reduction in BMD, so really minor changes and that was replicated by AbbVie at that dose and seeing slightly a greater dose related reductions in BMD at their higher dose 200 milligram BID and they will be obviously tracking that what that full data set to go into that NDA. So that's what the analysis is.

The FDA has typically been interested in not so much to mean change in BMD, but they want to look at is, what are the percentage of outliers, are there subjects that had clinically significant reduction in BMD. I think as you maybe aware DXA scans are not very precise that for an individual women the accuracy of a scan is plus or minus 3%.

So when we're talking about these small changes, you can't really talk about really being clinically meaningful what the FDA wants to see is, who are the outliers, are there women who had 5% reduction, 8% reduction, 10% reduction that sort of things. So that will be put into their package..

And Phil I might add that in the first Phase 3 trial probably this month is when the entire two years of that trial is done meaning that they've gone through the year of treatment and then one year off treatment.

In the second Phase 3 trial which they reported out in February the placebo reported portion the [indiscernible] study that one year of treatment should be completing this month also..

And do you have a sense whether AbbVie had disclosed some data from that 12-month post to its follow-up or will that simply be filed with the FDA, and I guess we'll see the data when FDA briefing documents come out or there is some sort of approval decision?.

Yes. So number one was, if you recall they didn't disclose data, but from the first Phase 3 last summer they did say when the one year portion was completed that they had un-blinded in their safety and efficacy that they saw was similar to what they saw at month six.

But to more completely answer your question, we believe that AbbVie is going to be presenting data. We don't know to what depth and if it's one or both of these studies, but where I think they would key for would probably be the ASRM, the American Society of Reproductive Medicine in October in Salt Lake City..

Great. That's very helpful. Thanks.

And then, second on valbenazine Kinect 3 extension kind of a similar question, will you aggregate that data and present it anytime soon or are they just for submission to the FDA?.

Most of it is for submission as part of the NDA. I'd like to get all the long-term data from Kinect 3 and Kinect 4 to summarize for a scientific meeting and just based on that kind of the lead time that's necessary for abstracts for these major meetings at the AAN, the APA, we're probably talking about next year for that..

Okay. Great. And then, one last question on valbenazine and the market.

What are your estimates for the proportion of patients who are out there with tardive dyskinesia, who are appropriate for therapy, so both have access to from reimbursement, but also are not institutionalized for some of their other conditions?.

Hey, Phil, its Tim. So we're going through actually that work right now and trying to really hunt down those numbers. But, we stay very conservative with our estimates. We put the number of the prevalence rate of 500,000, you can talk to the FDA or other sources and get numbers that are up closer to a million but we stay with 500,000.

We could look at ICD 9 codes and find those diagnoses. And then, for monitor severe we're looking at roughly 300,000. And so those are the numbers we're keying off of right now. We're doing that work and we'll probably be sharing more of that as the year goes on. But, right now, we're trying to dig into those different drugs and…..

And it's fair to say that probably half of those are commercial insurance and half are government insurance. So again, we're using these right conservative bases to work on..

Great. Thanks for taking my questions..

Sure..

Thank you. We'll take our next question from Charles Duncan with Piper Jaffray. Please go ahead..

Hi, guys. Thanks for taking the question. Congrats on the progress in the quarter, sorry for the background noise, much surprise here I'm in an airport.

But, I wanted to ask you about the upcoming APA meeting, what do you think is the most important point to get across to psychiatrist at least in terms of education, is it prevalence of GD, is it the high burden of GD or is it really the difference in your safety profile of valbenazine?.

So Charles, thanks for the question. I think all three of those things are important. But I honestly have to say that in the psychiatric community -- there is not currently much awareness of valbenazine or VMAT-2 and that's our goal this year as to start that education process.

Neurologists are a little different, but psychiatrists and so -- but the first order of business is to start having that conversation about the condition tardive dyskinesia.

As one of our scientific thought leaders has said forgotten but not gone not ignored but not gone, the prevalence is going up, but there has been no treatment options available and so psychiatrists, their number one concern, we'll hear this again and again is I want to keep my psychiatric patient stable.

So if you're going to come talk to me about management of TD, I want to know that I can take your therapy and add it on to the existing regiment that these patients are on. I do not want to destabilize the patient that we've worked so hard to stabilize.

And so that's going to be a lot of the effort showing them that we have the safety data that shows favorable adverse event incidents and profile that we're not really bringing out a safety signal that we're seeing worsening of depression or suicidality and that these development it can be combined with existing psychotropic medication.

So, I think that's the message that they're asking us for and that will be an important focus..

So Charles, thanks for the question. I think all three of those things are important. But I honestly have to say that in the psychiatric community -- there is not currently much awareness of valbenazine or VMAT-2 and that's our goal this year as to start that education process.

Neurologists are a little different, but psychiatrists and so -- but the first order of business is to start having that conversation about the condition tardive dyskinesia.

As one of our scientific thought leaders has said forgotten but not gone not ignored but not gone, the prevalence is going up, but there has been no treatment options available and so psychiatrists, their number one concern, we'll hear this again and again is I want to keep my psychiatric patient stable.

So if you're going to come talk to me about management of TD, I want to know that I can take your therapy and add it on to the existing regiment that these patients are on. I do not want to destabilize the patient that we've worked so hard to stabilize.

And so that's going to be a lot of the effort showing them that we have the safety data that shows favorable adverse event incidents and profile that we're not really bringing out a safety signal that we're seeing worsening of depression or suicidality and that these development it can be combined with existing psychotropic medication.

So, I think that's the message that they're asking us for and that will be an important focus..

And Chris, maybe you can explain why we -- why we had the three abstracts a day and versus the four that we chose to put at APA as far as how we speak to the different audiences with the concomitant use?.

I mean at the neurology meeting at the AAN, the neurologist they were interested in seeing the movement disorder change so there was a focus on the mechanism and a focus on the reduction in dyskinesia score.

The psychiatry meeting obviously we're talking about the reduction in dyskinesia, but we're talking about the underlying conditions schizophrenia, bipolar disorder, a major depressive disorder, the concomitant medications typical and atypical in psychotics.

And we're showing data on the psychiatric safety scale, [Technical Difficulty] the Montgomery Asberg depression rating scale, the young mania scale, the Columbia suicidality scale, the Calgary depression scale for schizophrenia et cetera.

So all of that work is geared towards the psychiatry audience which is a little different than what was at the neurology audience..

I mean at the neurology meeting at the AAN, the neurologist they were interested in seeing the movement disorder change so there was a focus on the mechanism and a focus on the reduction in dyskinesia score.

The psychiatry meeting obviously we're talking about the reduction in dyskinesia, but we're talking about the underlying conditions schizophrenia, bipolar disorder, a major depressive disorder, the concomitant medications typical and atypical in psychotics.

And we're showing data on the psychiatric safety scale, [Technical Difficulty] the Montgomery Asberg depression rating scale, the young mania scale, the Columbia suicidality scale, the Calgary depression scale for schizophrenia et cetera.

So all of that work is geared towards the psychiatry audience which is a little different than what was at the neurology audience..

It's helpful.

And then, if I could just ask a follow-up on Chris, I realize you probably not going to disclose the timing of the [indiscernible] NDA, but I'm wondering if it would be appropriate to assume that you would actually talk about it, one is, accepted for a review, and then, secondarily in terms of the European filing strategy when can we learn some more about that and can we hear about one or two of those things by the end of the year? Thanks..

Hi, Charles. So this is Kevin. You're right. We're not going to give anymore -- the color on the timing other than will be this year and also you're correct we won't announce when we submit we will announce when the FDA has accepted for file which is 60 days after submission.

And then, the second announcement would probably be followed two weeks after that which is when we get our PDUFA date and also be told whether we're going to be having an advisory committee or not. When it comes to our European strategy as you know I should say when it comes to an ex-U.S.

strategy we had -- we partnered valbenazine in Asia with Mitsubishi Tanabe. Right now, we don't have the bandwidth to entertain companies that would want to take the drug into Europe and so we're not going to be entertaining any of those until post commercialization..

Thanks for taking the questions..

Thanks Charles..

Thank you. We'll take our next question from Geoff Meacham from Barclays. Please go ahead..

Hey, guys. Its Carter on for Geoff. Good afternoon and congrats on the progress.

I guess just checking a few boxes here on Kinect 4 just get your level of comfort at those patients like the patients that are on Kinect 3? And then, the second question is, just if you could remind us on the sort of the state of commercial planning and where you on are in sort of flushing out your commercial team? Thank you..

So yes, Geoff the patients are -- the patients in Kinect 4 look just like the patients in Kinect 3..

So yes, Geoff the patients are -- the patients in Kinect 4 look just like the patients in Kinect 3..

And as far as flushing out the commercial team, right now the MSL team is pretty much on-boarded completely. So they're out in the field and they're very active right now with opinion leaders. In addition, what we've done is, we've been building out the marketing team now for several months and that is coming along extremely well.

Chris talked about with the MSL team how pleased we are with the -- the really the level of talent and I've got to say that's been going across the board with all of the hiring that we have been doing now through out the entire marketing team just the qualifications and the level of talent is outstanding that we've hired in.

That's not only for the brand team that's also for health economics and outcomes research team that's also for our market access and payer team that's been put together so….

And we're very close with the National Sales Director..

That's right. We're very close with the National Sales Director and actually the level just below the National Sales Direction with the Regional Directors. And so those hires actually are going to be very [Technical Difficulty] very soon.

The one thing that we are holding off on which is, I think you'd agree prudent is that, well, when we get the sales management team on-boarded they are then going to start the work of identifying the field sales force and investing all of them which should be around 125 field sales reps give or take a few.

And we will have them all offers out to them, but we won't be signing those offers until our PDUFA date next year..

Great. Thank you..

Thank you. We'll take our next question from Anupam Rama with JPMorgan. Please go ahead..

Hey, guys. Its Derrick in for Anupam this evening thanks for taking the question. Maybe Chris just a question on maybe what you're seeing in terms of the rate of conversion from Kinect 3 the extension phase of Kinect 3 trial and the roll over study? Any color around what reasons that might be per patients not converting or continuing to stay on drug.

And secondly, could you guys comment on where you are in terms of manufacturing API quantity into a launch potentially next year, would you need to bring on additional contractors?.

I'll do that. The first one first, the roll over study that we are just in the process of starting, its kind of, it wasn't designed to look at conversion because that actually wasn't up and running with a lot of the subjects finished.

But because of pressure from some patients and physicians investigators that they really were clambering that they wanted to continue to have access. We scrambled to put a protocol in place and its there, its not really set up to be a conversion.

Some of those subjects -- I mean the real conversion if you want to look at it is, how many people went from the placebo controlled part of Kinect 3 into the extension part of Kinect 3, which was the one year study. And at that one we've shown that the discontinuation rate at that time of conversions was really small.

We lost 12% of the patients during the six week placebo controlled trial from early termination and only a small proportion of the remaining subjects decided not to go into the extension. So that part is really good. I really won't know about the roll over study but I wouldn't look at that to give you a flavor of converges.

As far as the manufacturing all the APIs that the drug substance is done. We have always made the point of utilizing multiple manufacturers on different continents for our starting materials, our drug supply and the same thing is true with our drug product that is the capsules. So all of that is on track and obviously goes into the NDA..

I'll do that. The first one first, the roll over study that we are just in the process of starting, its kind of, it wasn't designed to look at conversion because that actually wasn't up and running with a lot of the subjects finished.

But because of pressure from some patients and physicians investigators that they really were clambering that they wanted to continue to have access. We scrambled to put a protocol in place and its there, its not really set up to be a conversion.

Some of those subjects -- I mean the real conversion if you want to look at it is, how many people went from the placebo controlled part of Kinect 3 into the extension part of Kinect 3, which was the one year study. And at that one we've shown that the discontinuation rate at that time of conversions was really small.

We lost 12% of the patients during the six week placebo controlled trial from early termination and only a small proportion of the remaining subjects decided not to go into the extension. So that part is really good. I really won't know about the roll over study but I wouldn't look at that to give you a flavor of converges.

As far as the manufacturing all the APIs that the drug substance is done. We have always made the point of utilizing multiple manufacturers on different continents for our starting materials, our drug supply and the same thing is true with our drug product that is the capsules. So all of that is on track and obviously goes into the NDA..

Great. Thanks..

Thanks Derrick..

Thank you. We'll take our next question from Ian Somaiya from BMO Capital Markets. Please go ahead..

Hi, this is [indiscernible] for Ian. And thanks for taking the questions. So first how much market development do you think will be needed in tardive dyskinesia and I know you've talked a bit to the organizational structures that you're starting to put in place.

But how much more do you think is still to come in will be needed? And then, my second question is, on some of the data presented at AAN, could you comment on the slightly higher rates of serious adverse events observed in the Kinect 3 study as well as the suicidal ideation observed and Phase 2 open label extension? Thanks..

Yes. So let's go in order then. The market education or market development is something that our MSLs are out in the field in now and our medical affairs team is talking to docs, attending psychiatry conferences, attending neurology conferences getting a handle on this.

I think it's fair to say there is a substantial education that has to occur for tardive dyskinesia. There has been no approved therapy for GD in the U.S.; there have been no educational initiative. And in fact, if anything docs are incentivized not to recognize diagnosed or see TD because they do not want to disrupt underlying psychiatric treatment.

And in the past, the only kind of algorithm if you will for GD management has suggested changing or -- changing the antipsychotic from one type to another type or discontinuing the antipsychotic or reducing the dose of the antipsychotic.

And primarily came from neurologists and the psychiatrists didn't want to hear that and because they work really hard to stabilize their patients.

And so there was a tremendous educational effort that I think is necessary and we -- that's why we are investing in our medical affairs team and health economics outcomes those efforts and they'll be going on this year.

And obviously, that transition from medical affairs to commercial will occur post launch and we think its -- this is not a bunch of warehouse patients that aren't two days after launch are going to start on drug. This is a major educational initiative with a slow build..

Yes. So let's go in order then. The market education or market development is something that our MSLs are out in the field in now and our medical affairs team is talking to docs, attending psychiatry conferences, attending neurology conferences getting a handle on this.

I think it's fair to say there is a substantial education that has to occur for tardive dyskinesia. There has been no approved therapy for GD in the U.S.; there have been no educational initiative. And in fact, if anything docs are incentivized not to recognize diagnosed or see TD because they do not want to disrupt underlying psychiatric treatment.

And in the past, the only kind of algorithm if you will for GD management has suggested changing or -- changing the antipsychotic from one type to another type or discontinuing the antipsychotic or reducing the dose of the antipsychotic.

And primarily came from neurologists and the psychiatrists didn't want to hear that and because they work really hard to stabilize their patients.

And so there was a tremendous educational effort that I think is necessary and we -- that's why we are investing in our medical affairs team and health economics outcomes those efforts and they'll be going on this year.

And obviously, that transition from medical affairs to commercial will occur post launch and we think its -- this is not a bunch of warehouse patients that aren't two days after launch are going to start on drug. This is a major educational initiative with a slow build..

And also Chris you may want to talk about not only how that treat GD, but also how to correctly diagnose it because not getting it mixed up with other movement disorders..

There are whole spectrum of drug induced movement disorders that historically physicians have lumped into one basket they call it extrapyramidal side effects or EPSE or EPS extrapyramidal syndrome. And in that is lumped Parkinson, akathisia, rabbit syndrome, drug induced tremors, acute dystonic reactions and then all the tardive syndromes.

And unfortunately, the diagnostic precision has never really been part of the training program for docs who are currently in practice and seeing these patients.

So one of the things that will be important is that educational programs are in place with really good quality clinical training materials, videos of patients, differential diagnosis, if this is a tongue tremor or tongue dyskinesia for example.

And so that's going to be a really important and frankly very enjoyable part of the educational program going forward. About your other questions you had talked about the SAE rates in the Phase 2.

In fact, I think and our investigators and opinion leaders think that the SAE rates in these trials are surprisingly low given the complex nature of these patients that become subjects in our Phase 2 and Phase 3 trials. These patients have major comorbid medical conditions.

They have metabolic syndrome due to their antipsychotic drugs, they're on polypharmacy, 90% of the subjects are in antipsychotics, some are on two antipsychotics, 70% are in antidepressants, 40% are in anxiolytic and anticholinergic, it's a major mix of things.

They have diabetes, hypertension, hyperlipidemia, cardiac disease and that was something like 20% of these subjects has hepatitis C. Polysubstance abuse history, it's astounding and 40% of the subjects that enter our trial have a history of suicidal ideation or suicidal behavior in their past.

So given all that the fact that we have this rather tentatively low rate that is not very different in placebo and active RDSMB says this is strikingly favorable and that they don't see a safety signal.

Obviously, it will be up to the FDA to assess the entire integrated safety and efficacy summarized to help us come up with what is a good label and what kind of labeling language will be necessary to guide clinicians. But so far, in fact, we don't think there is something significant there and we don't see suicidality signal specific to valbenazine.

We see a modest rate of suicidal ideation both before enrollment in trials and during trials and if anything in our placebo control trials we saw slightly more suicidal ideation in the placebo group than we do in the active group. But again, the numbers are low small and I don't make -- I'm not making any claims about that..

There are whole spectrum of drug induced movement disorders that historically physicians have lumped into one basket they call it extrapyramidal side effects or EPSE or EPS extrapyramidal syndrome. And in that is lumped Parkinson, akathisia, rabbit syndrome, drug induced tremors, acute dystonic reactions and then all the tardive syndromes.

And unfortunately, the diagnostic precision has never really been part of the training program for docs who are currently in practice and seeing these patients.

So one of the things that will be important is that educational programs are in place with really good quality clinical training materials, videos of patients, differential diagnosis, if this is a tongue tremor or tongue dyskinesia for example.

And so that's going to be a really important and frankly very enjoyable part of the educational program going forward. About your other questions you had talked about the SAE rates in the Phase 2.

In fact, I think and our investigators and opinion leaders think that the SAE rates in these trials are surprisingly low given the complex nature of these patients that become subjects in our Phase 2 and Phase 3 trials. These patients have major comorbid medical conditions.

They have metabolic syndrome due to their antipsychotic drugs, they're on polypharmacy, 90% of the subjects are in antipsychotics, some are on two antipsychotics, 70% are in antidepressants, 40% are in anxiolytic and anticholinergic, it's a major mix of things.

They have diabetes, hypertension, hyperlipidemia, cardiac disease and that was something like 20% of these subjects has hepatitis C. Polysubstance abuse history, it's astounding and 40% of the subjects that enter our trial have a history of suicidal ideation or suicidal behavior in their past.

So given all that the fact that we have this rather tentatively low rate that is not very different in placebo and active RDSMB says this is strikingly favorable and that they don't see a safety signal.

Obviously, it will be up to the FDA to assess the entire integrated safety and efficacy summarized to help us come up with what is a good label and what kind of labeling language will be necessary to guide clinicians. But so far, in fact, we don't think there is something significant there and we don't see suicidality signal specific to valbenazine.

We see a modest rate of suicidal ideation both before enrollment in trials and during trials and if anything in our placebo control trials we saw slightly more suicidal ideation in the placebo group than we do in the active group. But again, the numbers are low small and I don't make -- I'm not making any claims about that..

Great. Thanks..

Thank you. We'll take our next question from [indiscernible] from Leerink. Please go ahead..

Hi. Thank you for taking the question, I'm filling in for [indiscernible].

Just a quick one regarding Tourettes, what is known about pediatric Tourettes or adult Tourettes and how they differ and is there one of the stop relations that you think the drug could be more or less efficient and just a second quick one what's the status of the CAH program, when do we -- when can we expect to get some updates on that?.

So the CAH program as I mentioned, we in fact we just published recently our proof-of-concept study with our initial compound. But the surprise was when we actually did the juvenile talk. So if you go into small children we had a finding so we brought forth our back up compound.

We're doing all the work right now with that compound in order to open a new IND for this new compound in the same indication. And the goal is kind of end of year for that being ready to have that new IND. So that's happening in the background.

Now for Tourettes, of the population of patients with Tourettes in the United States, it's about 80% kids, 20% adults. Nobody really quite understands why most adolescents who have tics tend to have a diminishing in tick severity and frequency as they become adult, that is not understood.

The path of physiology of Tourettes in and of itself is not completely understood. So I really can't tell you, if there is anything different about adults versus kids. The only thing we know is that there are a lot of comorbid conditions with tics. So ADHD, OCD, effective and behavioral problems.

And in the adult population with Tourettes they're struggling with their tics, but they're usually struggling with one of these comorbid challenges. And by the time, you're an adult with persistent and more intense and frequent tics, you're usually -- you're life is usually impacted in a big way.

And so as far as whether that those tics will respond to valbenazine differently in adults than in children, I have no reason to believe that. But, nobody has really done that careful study we're doing this now in Phase 2.

I can tell you that the subjects that are enrolling in our two Phase 2 trials are very typical of the kinds of Tourette patients that enroll in well controlled trials they come in with baseline [AL] [ph] global tics a various scale scores in that 25 to 30 range they have both motor and phonic tics.

And our particular trial, we are not allowing subjects in who are on dopamine antagonist medication just because that's a confounding variable for a Phase 2 trial whether we allow those subjects in, in subsequent trials, I don't know yet.

But we're approaching this we have good data that in adults we think the same doses that we use for tardive dyskinesia are appropriate for Tourette syndrome in adults. Obviously, in children we have PK modeling and a lot of Phase 1 work that was done to help us chose the adult -- the dose that goes into children.

We're enrolling six year olds in these trials. So we have obviously much lower doses. But, we have good reason to believe that the response to valbenazine should be gratifying in both populations..

So the CAH program as I mentioned, we in fact we just published recently our proof-of-concept study with our initial compound. But the surprise was when we actually did the juvenile talk. So if you go into small children we had a finding so we brought forth our back up compound.

We're doing all the work right now with that compound in order to open a new IND for this new compound in the same indication. And the goal is kind of end of year for that being ready to have that new IND. So that's happening in the background.

Now for Tourettes, of the population of patients with Tourettes in the United States, it's about 80% kids, 20% adults. Nobody really quite understands why most adolescents who have tics tend to have a diminishing in tick severity and frequency as they become adult, that is not understood.

The path of physiology of Tourettes in and of itself is not completely understood. So I really can't tell you, if there is anything different about adults versus kids. The only thing we know is that there are a lot of comorbid conditions with tics. So ADHD, OCD, effective and behavioral problems.

And in the adult population with Tourettes they're struggling with their tics, but they're usually struggling with one of these comorbid challenges. And by the time, you're an adult with persistent and more intense and frequent tics, you're usually -- you're life is usually impacted in a big way.

And so as far as whether that those tics will respond to valbenazine differently in adults than in children, I have no reason to believe that. But, nobody has really done that careful study we're doing this now in Phase 2.

I can tell you that the subjects that are enrolling in our two Phase 2 trials are very typical of the kinds of Tourette patients that enroll in well controlled trials they come in with baseline [AL] [ph] global tics a various scale scores in that 25 to 30 range they have both motor and phonic tics.

And our particular trial, we are not allowing subjects in who are on dopamine antagonist medication just because that's a confounding variable for a Phase 2 trial whether we allow those subjects in, in subsequent trials, I don't know yet.

But we're approaching this we have good data that in adults we think the same doses that we use for tardive dyskinesia are appropriate for Tourette syndrome in adults. Obviously, in children we have PK modeling and a lot of Phase 1 work that was done to help us chose the adult -- the dose that goes into children.

We're enrolling six year olds in these trials. So we have obviously much lower doses. But, we have good reason to believe that the response to valbenazine should be gratifying in both populations..

Great. Thank you very much..

And it appears, we have no further questions at this time..

Okay. Well, thank you very much. What you heard from Chris and from Tim are two things; number one, the programs are all moving along very well. We're very pleased with AbbVie and the outstanding job that they've done with Elagolix both in endometriosis and Uterine Fibroids.

And in addition we are moving along the VMAT-2 franchise that we have here and I say franchise because as you can see we're the first indication is TDs and followed by Tourettes, but we continue to invest in ways that we'll talk about in the coming months and years on that. We're fortunate that the company is well financed.

We have no need as you heard from Tim to do any sort of equity raises here. We're going to be ending this year. We started this year with over $460 million in cash. We're going to end this year with over $320 million in cash probably over $325 million in cash. We'll enter our commercialization year.

And that was a very healthy cash position going forward. And we don't even throw into any of those projections that we do going forward from there the milestones which is significant that we would be getting from AbbVie each year over the next four years just for endo and Uterine Fibroids.

So, while the markets are choppy now, and we have held up fairly well in these choppy markets. It doesn't affect our business. We've got plenty of funds. It doesn't affect the strategy nor the tactics that we're taking through out the company. So with that I'll end.

And I thank you very much and we look forward to seeing any of you that's really going to be at APA in a couple of weeks. Take care..

Thank you. This does conclude today's program. You may now disconnect your lines and have a wonderful evening..