Kevin Gorman - CEO & Director Jane Sorensen - IR Matthew Abernethy - CFO Eric Benevich - Chief Commercial Officer Eiry Roberts - Chief Medical Officer.

Geoffrey Meacham - Barclays Brian Skorney - Baird Tazeen Ahmad - Bank of America Anupam Rama - JPMorgan Jay Olson - Oppenheimer Philip Nadeau - Cowen and Company Biren Amin - Jefferies Alan Carr - Needham & Company Sumant Kulkarni - Cannacord David Amsellem - Piper Jaffray.

Good day, everyone, and welcome to Neurocrine Biosciences Reports Second Quarter 2018 Results. [Operator Instructions] It is now my pleasure to turn the conference over to, Kevin Gorman, CEO. Please go ahead sir..

Thank you very much, and welcome, everyone to our quarterly conference call. Before we start, we’re going to be making forward-looking statements. So Jane if you could read our Safe Harbor statement, please..

Okay. Certain statements made in the course of this conference call that are not historical statements may be 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 quarterly report on Form 10-Q filed today and in today's press release.

Copies may be obtained by visiting the Investor Relations page on the company's website. Any forward-looking statements are made only as of today's date, and we disclaim any obligation to update these forward-looking statements.

Kevin?.

Thank you, Jane. So I’m joined here today by Eiry Roberts, our Chief Medical Officer; Matt Abernethy, our Chief Financial Officer; and Eric Benevich, our Chief Commercial Officer. I’d like to start the call of, by congratulating our Partner AbbVie, and in particular the entire clinical and regulatory team in Chicago.

They have done an outstanding job with elagolix since we form this partnership several years ago. I think that I echo, what Rick Gonzalez said on their call earlier in the week that, the label for ORILISSA is an outstanding label and it is indicative of its reflective of the real high quality Phase III program that was conducted by AbbVie.

We have flexibility of dosing in this label, there is no monitoring requirements in this label. There is a -- while there is a recommended duration of dosage treatment, patient can stay on the drug and definitely that is a decision up to the patient and their physician, there is no restriction on duration of dosing.

There is no boxed warnings, and so I really think that this label is outstanding and as I said, the quality of the development program, the regulatory program that went into this has shined through here. I also want to say that going forward, we have complete confidence in the AbbVie commercial team.

We have been interacting with them for, well I’d say nearly the last two years, and we’ve seen a lot of the work that has started to come out with ORILISSA, and the work that Rick Gonzalez talked about that, you’re going to see over the next several months.

And so we have nothing but confidence in AbbVie, and how they will handle this launch and the trajectory of ORILISSA. Now, I would like to switch gears and let's talk about Neurocrine. And so I want to take a step back. This really is a special and unique time for any biotech company.

Calls like this, the quarterly earnings calls that go over just the past three months. But this is as I said, is a very special moment in time and I don't wanted to get lost as we go into the details over the next hour.

We are a company that is in the very early stages of a continuing extremely successful launch and with a product that treats a disease that was previously untreatable and absolutely if it isn't enough. We have a second drug approved that will change the lives of millions of women. Both of these drugs were discovered here at Neurocrine.

I think I speak for all of us, both the current employees and former employees that we are both proud and humbled to be in this position. So with that, let's get into the details. And I'd like to start by turning the call over to Matt and he can talk about what a great quarter this has been..

Thanks, Kevin. Good afternoon and thank you for joining our second quarter 2018 earnings conference call. Neurocrine has had a tremendous start to 2018 with INGREZZA continued success, ORILISSA receiving FDA approval, positive Phase III data for uterine fibroids and a green light from the FDA to proceed towards an NDA submission for opicapone.

During the second quarter of 2018, INGREZZA saw script volume increase to approximately 16,700 scripts, resulting in $96.9 million in net product sales. This compares to 12,500 scripts and $71.1 million in net product sales for the first quarter of 2018.

Through the first six months ended June 30, 2018 INGREZZA net product sales were $168 million compared to $6.3 million for the same period last year. As a reminder INGREZZA was made available for commercial distribution on May 1, 2017.

The TRx upward trajectory, during the second quarter reflects steady new patient flow, an uplift coming off of payor related seasonality in Q1 and continued positive persistence trends. We expect persistent trends to win further over time, as we have more patients on drug longer.

Regarding net revenue per scrip for Q2, we experienced a slight increase from approximately $5,700 per script in Q1 2018 to approximately $5,800 per script in Q2 of 2018. The increase is primarily a reflection of lower impact from the Medicare Part D doughnut hole as compared to Q1.

This was partially offset by the continued decrease in scripts being filled as 240 milligram capsules versus the 180 milligram capsule. Scripts being filled with 240 milligram capsules was in the mid single-digits of our total scripts during the quarter and expect us to continue to decrease throughout 2018.

Net loss for the quarter was $5.9 million or $0.07 loss per share, compared to a net loss of $60 million or $0.68 loss per share for the same period in 2017. For the six months ended June 30, 2018, the net loss was $47.7 million or $0.53 loss per share, compared to a net loss of $138.3 million or $1.58 per share for the same period in 2017.

Recall that INGREZZA was launched in the same quarter of 2017. So when comparing 2017 to 2018, there was only $6 million of corresponding Rx revenue during the first half of 2017. Research and development expenses were $37 million during the second quarter of 2018, compared to $21.9 million during the second quarter of 2017.

The increase in R&D expenses during the period is a reflection of the continued progress being made across our pipeline including Tourette, CAH and also preparation for our anticipated 2019 opicapone NDA filing. In addition, we continue to invest preclinically with a goal of at least one IND in 2018.

For the six months ended June 30, 2018, R&D expenses were $85.9 million as compared to $73.8 million for the same period last year.

The increase from the prior year was primarily a result of an increase in the previously mentioned clinical program activity, an $8 million non-recurring stock compensation charge in Q1 of 2018 as well as the $10 million timeline to BIAL Q1 of 2018.

This year-over-year increase in R&D during the first half of 2018 was partially offset by the timing of $30 million exclusive licensing payment made to BIAL for opicapone in the first quarter of 2017. Sales general and administrative expenses increased to $60.9 million for the second quarter of 2018, from $41.7 million for the second quarter of 2017.

For the six-months ended June 30, 2018, SG&A expenses were $119.6 million compared to $69.7 million for the same period last year. The increase in SG&A expenses across both periods is primarily due to commercialization activities for INGREZZA.

Our cash investments and receivable positions as of June 30, 2018 was over $800 million, positioning us well to execute our near term company strategy. Now a few comments as we look ahead towards the second half of 2018.

With the approval of ORILISSA we will recognize revenue during the third quarter for the $40 million event based milestone due to Neurocrine under our collaboration agreement AbbVie. In addition we will also begin earning a two royalty from AbbVie based upon their net sales of ORILISSA following their launch in August.

As it pertains to INGREZZA, we remain encouraged by our progress in the marketplace and also how we are executing our sales force expansion plan which we expect to have completed entering the fourth quarter of 2018.

Specific to INGREZZA third quarter net product sales we expect there to be continued new patient demand and an increase in overall script volume. As with all launches, certain factors cause fluctuations in growth quarter-to-quarter.

For us, the items we are managing through heading into Q3 include the possibility of distraction from our sales force expansion. Seasonal dynamics and the continued decline in mass scripts being filled as 240s. The long term potential with INGREZZA is robust. But as always, I want to make you aware of the key items we're focused on specific to Q3.

Regarding operating expenses for 2018, we still expect our operating expenses to fall within our previous guidance range of $395 million to $420 million. With that, I will now hand the call over to our Chief Commercial Officer, Eric Benevich..

Thanks Matt. And hello to everyone joining us on today’s call. The second quarter of 2018 was a great quarter for our INGREZZA TD launch. And I couldn’t be more proud of the performance of our team and their effort to help the many patients suffering from TD.

As of Q2, we have now been on the market for approximately a year and the launch continues to exceed expectations. As Matt said, net sales in Q2 were nearly $97 million, representing a 36% increase over the previous quarter. And over our first four full quarters of our launch, we have generated $278 million in net sales.

The key metric of assessing performance, is the impact of patients, which is reflected in our total prescriptions, which increased 34% over the prior quarter to 16,700. New patient starts remain steady and patient persistency continues to be in line with our expectations as the launch matures.

From a prescriber perspective, our TRx growth is coming from both new prescribers and prescribers expanding use within their practices, as they get experience with INGREZZA.

We see ample opportunity over the coming years, to expand both the breadth and depth of our prescriber base, which we believe will be realized through continued disease state awareness, education and real life clinical experience with INGREZZA.

The INGREZZA brand continues to see favorable coverage across all payer segments, with a vast majority of prescriptions acquiring a prior authorization confirming diagnosis of TD.

Through the first year of the launch approximately 80% of written prescriptions have led to dispense medication and INGREZZA remains affordable for patients with over three-quarters of them paying less than $10 out of pocket per month. INGREZZA is the market leader in TD, and we intend to build on that momentum.

Our previously announced sales force expansion, is right on track. We have received literally thousands of applications for less than 100 new sales physicians. We’re currently interviewing many highly qualified applicants across the country, with extensive experience in neurology and psychiatry consistent with our existing sales team.

As Matt mentioned, we are taking measures to minimize distraction from this expansion on our current sales team and existing customers. And we expect to deploy our newly expanded team in Q4.

Combining the new team members with our highly capable existing sales force, gives us great confidence, that we’ll continue to make significant progress in developing the TD market over the years ahead. Going forward into the balance of the year, we have progressed on executing our plan of continuing our TD educational efforts.

We are helping healthcare providers recognize the range of presentations and severities of TD, helping them appreciate the multi-faceted burden that TD can place on patients and their loved ones. And urging them to identify and treat appropriate patients with INGREZZA.

The first FDA approved medication for TD and the only treatment option that offers robust efficacy, no box warning, favorable tolerability and simple once daily dosing without complex hydration. So in summary, Q2 2018 was a great quarter for the INGREZZA brand and for our company.

We attribute the strong results to an attractive drug profile, a great team and also a focused execution of our market building strategy. Approximately a year into our launch, we continue to deliver consistent and steady growth and most gratifying to me and the rest of our team is that we have helped thousands of patients suffering from TD.

We are truly living up to our shared aspiration of delivering on hope. So with that, I’ll now turn the call over to Eiry Roberts, our Chief Medical Officer, to discuss progress with our clinical programs.

Eiry?.

Thank you, Eric. And good afternoon to everyone on the call. I'm pleased to be able to provide an update on progress this quarter across our clinical programs. For INGREZZA, at the American Psychiatric Association Annual Meeting in May, we shared new data from the RE-KINECT Study.

This study is the largest real world screening study of patients with clinician confirmed possible tardive dyskinesia. Designed to provide valuable insight into the impact of involuntary movements on the quality of life for patients taking antipsychotic medication.

Data from this study demonstrate that nearly 28% of the study population treated with antipsychotics had clinician confirmed possible tardive dyskinesia. In addition, over half of the patients with possible TD experience uncontrollable movements in two or more body regions.

New data from the KINECT 4 study were also presented at APA, demonstrating that long-term treatment with INGREZZA provided sustained clinically meaningful improvement in tardive dyskinesia without the emergence of new safety signals. Turning now to the Tourette indication for valbenazine.

The T-Force GOLD study, evaluating optimized doses of valbenazine in approximately 120 pediatric patients with Tourette syndrome has continued to progress and we remain highly confident in our plan to release top line data from this study late in 2018.

With these data in hand, we will meet with the FDA in the first part of 2019 to discuss the path forward to submitting an sNDA in Tourette syndrome for valbenazine. In recent weeks the T-Force PLATINUM study began patient enrollment activities with good success to date.

As previously described T-Force PLATINUM is a double-blind, placebo-controlled, randomized withdrawal study of valbenazine in approximately 180 pediatric patients with Tourette syndrome. Enrollment in this study is progressing to plan and we anticipate having top line data available at the end of 2019.

In addition in the second quarter, we commenced enrollment into the open-label extension study T-Force GOLD Plus for Tourette Syndrome patients.

Subjects to complete participation in the T-Force GOLD study are eligible to roll over into participation in this open-label extension study, for an additional six months of treatment with optimized doses of valbenazine.

The study will collect longer term safety and tolerability data in children and adolescents, as well as providing useful information about the maintenance of efficacy in these patients over the six months period of dosing.

Opicapone, we remain on track with the work required to complete the NDA dossier and to support submissions for this molecule in the first half of 2019. Of note, we recently successfully completed dosing in the last of the planned clinical pharmacology studies, final reports from these studies will be included in the NDA submission.

Turning now to our CAH program and the Phase II proof of concept study examining the pharmacokinetics, pharmacodynamics and tolerability of NBI-74788 in adult patients with classic, 21-hydroxylase deficiency.

As mentioned last quarter site initiation was slower than originally planned for this study, but we now have our sites active and focused on enrollment. We anticipate that initial data from the study will be available later this quarter with the full study completed in quarter four.

With these data in hand, we plan to meet with the FDA to discuss the path forward for this -- the clinical evaluation of this molecule as a novel treatment for both adults and children with Congenital Adrenal Hyperplasia.

We remain very encouraged by the progress we are seeing across our clinical development portfolio and look forward to sharing data with you later in the year. With that, I'll now hand the call back over to Kevin for some closing remarks..

Thank you very much Eiry. So obviously as you got from Matt and Eric and Eiry, a very productive quarter for us. We're on track to continue to bring new and important medicines to patients and in multiple indications. So what I'd like to do now is open up the call to everyone's questions..

Certainly. [Operator Instructions] Our first question comes from Geoff Meacham with Barclays. Please go ahead..

Good afternoon guys. Congrats on the quarter and thanks for the question. Just on the commercial INGREZZA, I know as always I ask on duration trends, so if you can get specific on that it will be great. Then for this quarter, was there any [feeding] call out among psychiatrists or among physicians that could represent a tipping point in demand.

Just given the sequential trend, I know Matt, you called out some seasonality, but if there is anything outside of that. And I have one more follow-up..

Yeah so Geoff.

Can you clarify your question it was about the duration of treatment?.

Yeah just persistent trends and then anything that called out with respect to potential tipping point in the demand?.

Okay with regards to persistent trends, we went into the launch expecting persistence with our medication INGREZZA would likely be consistent with what we see for other medications that are typically used in these patient populations, antipsychotic medications, antidepressant medications and so on.

And that's so approximately where we seen they will maybe a little bit better than what we expected. Certainly as we get more and more patients that have been on drug for longer, the average has come down. But thus far we've been really pleased with the persistence that we've seen and we think that it may be due to two factors.

One is that this is a highly symptomatic condition. We know that based on the expansion of the KINECT 3 study that when patients go off their medication as they did at the end of the open label extension the TD movements returned fairly quickly.

And the other thing is that we've got a distribution model where patients are being contacted by the pharmacy and that tends to help keep them on drug. So overall, we're happy and pleased with the persistence that we're seeing at this stage of the launch.

And the second was really around -- a question I guess that you had was really around a tipping point. I don't think of it in terms of tipping point. I view launches as a sort of series of searches so to speak. As you identify opportunities and you continue to tighten up your messaging and your targeting and so on.

So I think that we would expect to see a variability or fluctuation from month to month or from quarter to quarter in terms of what that growth rate looks like, but we expect to see continued growth.

And obviously we are in it for the long haul in terms of making the investment, educating our customers about TD, and helping them to identify appropriate patients for INGREZZA. So, I hope that addresses your question..

The only thing I’d add Geoff is, we made the decision to invest in the sales force last quarter and that is a clear sign to our belief and the market opportunity here in that as Eric said just the long-term potential we see as very significant..

And just related to that Matt just as a follow-up for you and for Kevin. On the P&L, you guys have been pretty disciplined on the cost side and it looks like even before elagolix economics kick in you are almost profitable.

And so the question is how much of a priority going forward is the earnings trajectory versus the INGREZZA launch and/or the pipeline? It just seems like a range of our purchase to investments in the business will sneak that transition to close to profitability?.

Yes, so I’ll jump in first Geoff and just say that we are investing in the company and we’re going to make those smart investments in the company.

Obviously first and foremost is in our internal R&D organization and our commercial organization to make INGREZZA as successful as possible and then also to bring all of our programs forward as rapidly as possible.

And then secondarily we are or second, we are going to be looking on the outside for other compounds and programs to bring into the company.

So, profitability isn't something that we either avoid or try to maximize actually at this point, where we look at it is that the cash flows that we have coming in from INGREZZA and that we will have coming in from ORILISSA, are just going to make us that much stronger in being able to develop our pipeline..

Okay, thanks..

Thank you. We’ll go next to Brian Skorney with Baird. Please go ahead..

Hey good afternoon guys, thanks for taking the questions. Just wanted to follow-up a little bit on some commentary around pricing and per prescription and what we can anticipate in future.

I guess any comment on what the payer mix you are currently seeing is and what you think that maybe switching through if there is any sort of [training] in terms of private versus public and thoughts around contracting in TD? And also wanted to kind of follow that up with whether or not you are seeing any penetration from Austedo in terms of growing market share and if you are seeing if that market share is coming from TD patients new to any treatment or primarily from an INGREZZA failure population? Thanks..

Hi, Brian. I think you had four or five questions in there, which we really appreciate. I’ll take the first one on through of our net revenue per script gross to net and Eric will take the contracting and commentary around our competition.

So from a gross for net perspective an payer mix, we are seeing some fluctuation quarter to quarter for example as you get on different state Medicaid plans as you can see Medicaid mix increasing because of that. We have not provided historical insight into what our exact mix of government versus private and we’re not intending to do that here.

So, I’d call we are having some change but not major change at this point in the launch. And then from a gross for net perspective, we've not been at a place where we've had to contract yet.

In addition, as I alluded to on the call, we do still have mid single-digit percentage of our total scripts going out as 240 milligram capsules, which gives us a bit of a lift on that net revenue per script. But we expect that to go down throughout 2018. So Eric is going to comment on contracting and competition..

Yeah, so just want to sort of piggyback on what Matt said. We, you know, we're over a year into our launch and we haven't been contracting with payers. We feel good about the value.

The value proposition of INGREZZA and certainly, we feel that the reimbursements been favorable thus far, and it's appropriate to have doctors confirm a diagnosis of TD before the health plan is going to reimburse for that claim.

But so thus far, a year in -- a year plus into our launch, we haven't been contracting with payers, and we're happy with the access. We think that this is a really favorable situation. Second thing with I guess, sort of the fourth part of your question was the competition piece.

We actually view our main competitor as apathy or inertia in other words, physicians and other healthcare professionals that do nothing. And historically, that's been sort of the standard of care for TD and we're changing that, with education.

And, when we think about motivating our customers to make the diagnosis and treat patients, that's a win, that's a win for the patient. We know that there is a reformulated Tetrabenazine product that's also on the market and for the same indication. We don't hear a lot about it from our customers. But frankly, we don't focus on it.

So, we're really facing forward, we're delivering on our strategy of educating customers. And we're really pleased with the product profile that we have. And we think that that's really the main reason along with our execution, the main reason that we're seeing the results that we have so far.

The strong efficacy, the lack of a box warning, the tolerability profile and once daily dosing with no complex titration, those are all reasons that we're seeing the uptick that we are having thus far.

So with regards to the other company and their product, we'll let them comment on where they think they're getting the bulk of their business, but we're focusing on adding new patients and giving the existing patients the best possible experience with INGREZZA..

We'll go next to Tazeen Ahmad with Bank of America. Please go ahead..

Good afternoon, and thanks for taking my questions. A couple for me. Can you give us an update on where you are, you talked about your sales force expansion now being underway. But how much of that is complete? How much of that might have contributed to your strong quarterly results? And then I have a couple of follow-ups..

Yeah, so hi, it's Eric again. It's -- we are in the midst of it, right now. We're interviewing candidates, as I mentioned in my prepared remarks, and they haven't been on board and haven't started their training yet. So the results that we reported out for Q2, don't reflect that sales force expansion.

In fact, what we're really focused on in addition to identifying the best candidates is minimizing any distraction factor to our existing team and customers. So I was really pleased with the results for Q2, as you can imagine, especially in light of the possibility of some distraction coming from that expansion.

We expect to be able to put the new expanded team in the field early in Q4. And obviously if that's heading into the holidays, it's going to take a little bit of time for the new hires to get around to meet all the customers.

And so there is going to be a bit of time lag between when we put the new field team in place and when we start to see the impact of that. But so far so good and I've been really pleased with the quality of the candidates that we've been able to attract into the interview process..

Okay, and related to that, is your plan to have sales reps focus on fewer doctors per targeted area or are you trying to have multiple place of contacts in the same areas?.

Yeah. So the way I would characterize it is that even though we're going to have the smaller territories, the number of physician targets and institutional targets will be approximately the same.

In other words, through the first nine-months or so of the launch, we've identified a lot more attractive ACP targets and have pulled them into our target universe. We don't have the bandwidth to cover everyone that appears to be valuable from an INGREZZA perspective.

And so that's part of the rationale for the expansion, is this that there is more opportunity that what we had originally anticipated before we had our field sales team out there calling in customers.

So smaller geographies, similar number of physicians and allied health professionals and institutional accounts that they'll be covering in those territories..

Okay, thanks Eric. And then one for Kevin.

On T-Force GOLD what top-line information do you expect to release when we expect to see the data I guess by year-end? And what would be next steps following that if you could remind us assuming that the data is positive?.

Well I start to answer than and if Eiry doesn't grab me by the throat I guess I'll finish. What we'd expect to do is what we have done in the past, we will show the primary endpoint Yale Global Tic Severity Scale score YGTSS is going to be the change from baseline sign as compared to placebo. And so you'll get that by magnitude and p-value..

That's correct. And as I mentioned in the prepared remarks, we will then take the entire data set from the study and take that to talk with the FDA in the first part of next year in order to understand the path to supplemental NDA submission..

And is it still your growing assumption that if the data is positive that this could serve as your pivotal?.

It is a pivotal study, and we intend that to be the strategy that we're going forward..

Okay. Thank you..

Thank you, Tazeen..

We'll go next to Anupam Rama with JPMorgan. Please go ahead..

Hey guys, thanks so much for taking the question.

Just quick one for me, you guys kind of commented on this in your opening comments, but when you think about those accounts where you have the longest relationships or maybe strong initial uptick out of the [gate point] in INGREZZA last year, how would you describe the level of penetration into those accounts? How much room is there to grow within those accounts? Are you seeing any type of plateauing effect? What are the kind of trends there? Thanks so much, no follow ups..

So I would say there is still considerable room to grow. And the reason is that in some of these accounts you have multiple providers and expanded staff. And so our typical model is to go in and to sort of educate the prescribers but also the integrated care team, includes the nursing staff, case managers and therapists and so on.

And so what this really requires is for everyone to be aware of TD, to understand TD, to recognize TD symptoms and to bring to the attention of the prescribers.

And with multiple prescribers in these clinics you are kind of bringing them along in different rates and certainly there is the large number of patients in some of these community mental health centers that still could benefit from screening and treatment with INGREZZA.

So I think there is still a lot of upside, even in the institutional accounts, where we have already gotten contraction..

Thanks so much for taking our questions..

We’ll go next to Jay Olson with Oppenheimer. Please go ahead..

Hey guys, congrats on the quarter and thanks for taking my questions.

I just wondering if you could breakdown the 16,700 TRxs into NRxs and refills and also maybe comment on the mix of prescribers between neurologists and psychiatrists? And then also I was wondering if you could just talk about the impact that your educational program for psychiatrists has had the program that you rolled out at APA back in April?.

Hey Jay, this is Matt, thanks for the question. We aren’t providing the breakdown between NRxs and refills. But hopefully you can see, when our sequential trend up it would -- it would show that we had a good flow of new patients.

And as we said in our comments, persistence trends have been higher than what we expect from a long-term perspective, once patients are in drug longer. So we feel really good with what we’re at, both on new patients adds, as well as both the refill rates.

From a sales mix perspective similar to what we have said in the past our call point, or call 80-20, 80% psychs and 20% neurologists and that’s pretty reflective of what you would see in our underlying script volume. From an educational program prospective I will hand it over to Eric..

Yes, I’ll just say that we’ve been very active in terms of peer to peer education, certainly having a presence at the national and regional professional medical meetings such as AAN and APA helps, but the bulk of our prescriber universe doesn’t go to those meetings.

And, so we have been doing a lot of work with our speakers bureau bringing in for example, a neurologist to speak to a psychiatrist audience bringing psychiatrists to speak to psychiatrists audiences and so on. And so that’s been really valuable as physicians learn about a new medication and a new way to treat a previously untreatable condition.

They rely on the experience of others that have started to get some clinical experience and so at this stage of the launch, there is a lot of peer to peer activity, as part of our overall strategy..

Great, thanks for taking the question..

We’ll go next to Philip Nadeau with Cowen and Company. Please go ahead..

Good afternoon, congrats on a good quarter and thanks for taking my question. First one on the overall size of the tardive dyskinesia market prior to the launch and believe you put the figures that suggest that there maybe 500,000 patients with tardive dyskinesia in the U.S. and 280,000 who are moderate to serious so appropriate for treatment.

How has your understanding of those figures changed as you’ve been in the market for a year and in particular as you find more physicians that are maybe treaters of these patients?.

Yes, I think our understanding of the overall prevalence is the same as what it was. Certainly we've relied on multiple publications in the medical industry to help us size the market. Certainly going into this launch, it was our belief that the majority of these patients were undiagnosed.

So our focus is not only on what's the overall size of the market opportunity, which we think is considerable. But really growing that immediately accessible patient pool, which is the diagnosed patients that are under the care of physicians that we can reach -- physicians and other healthcare professionals I should say.

So as we expand that addressable patient pool, we're both increasing the opportunity in the near-term, and we're focusing on penetrating that near-term opportunities. So, sort of a two-pronged approach for us. Grow the pie and take a slice of the pie..

And so just one thing, I want to follow-up on this. Again the appropriateness of a patient for treatment isn't really correlated with the severity of their tardive dyskinesia.

There are and as we have seen that have gone on treatment both by the physician and by the patient populations who would be categorized at mild tardive dyskinesia have found significant benefit from the drugs. So, I just wanted to jump in with that..

Go it. That's helpful. And second on pricing you mentioned our pricing picked up actually quarter-over-quarter due to doing a whole another seasonal effects. Aside from the change in the two times 40 milligrams pill to that you expect to go forward.

Are there other seasonal effects we should be aware of that would affect the price per script to the remainder of the year?.

No I think it's primarily the 240s. And as Eric mentioned earlier, we're not really in a place where we're contracting yet that could be something that would have a have some sort of an impact. But at this point, I would point to the 240 as probably being the biggest driver..

Got it, okay. And then one last question on ORILISSA. You mentioned that the duration that is on the label is really recommendation not a restriction.

I'm curious what you think payers are likely to do with those recommendations? Do you think that the payers will give patients a hard time so they want to stay beyond the recommended duration? Or is it just too early to know?.

So Phil, I think that Rick Gonzalez actually talked about their reception from payers thus far and their work with them leading up to the launch. And it seems to be very good, he's very encouraged by it. You would anticipate that the payer environment is going to change and payers are going to put hurdles in where they think they can.

But honestly, you've had women who have been suffering from the debilitating pain of endometriosis for years. Now they're getting an oral product that for the first time they can take, relatively few side effects and has outstanding efficacy.

It would be hard to believe that after two years of such relief that a payer would be able to put a substantial hurdle in front of that patient continuing on treatment..

That's very helpful. Thanks and thank you again for taking my question..

Thank you..

We'll go next to Biren Amin with Jefferies. Please go ahead..

Hey guys. Thanks for taking my question. And congrats on the quarter.

I guess over the new patients coming I think INGREZZA, what percentages are coming from Austedo, what percentage are coming from off label therapies and what percentage are new patients?.

Yeah. Hey Brien thanks for the question. We do our surveys and that other surveys that have been done very little switching between us and Austedo at this point. From a off-label use, we do hear some instances that it could be used on occasion off label.

We do not incentivize our market in that regard and would be a very, very low percentage of any of the business that we do, but are very careful around that obviously. And then from a NRx as I told Jay, we've not provided that mix..

Yeah. The only other thing that I would add to Matt's comments is that with our focus on helping our customers with recognition and diagnosis the vast majority of patients that again started on INGREZZA are newly started on treatment for their TD..

Got it.

And then I guess can you tell us or give us any color on what percentages that are coming from large volume centers versus small community clinics?.

No, but what we have commented on that we see scripts are not heavily concentrated when you dig into our customer base. Very straight up..

And the reality is that in neurology and psychiatry most of these physician practices are small. Small group practices. And so that's where we're getting the bulk of our prescriptions..

Got it okay.

And then maybe just a follow up on T-Force [GOLD] in Tourette are you randomizing patients and which half of the patients see a response on the Yale Global Tic Severity score with INGREZZA? And I guess of the 180 patients enrolled, how many do you expect to enroll into that randomized phase?.

Thank you for the question. We are randomizing patients from the basis of seeing a favorable response to valbenazine in the first 12 weeks of treatment. That actually is not necessarily you to think the Yale Global Tic Severity score is actually is more an assessment of physician assessment of clinical improvements.

And we haven't actually released exactly what we anticipate as being the rollover rate. We obviously powered the study based on what we believe would be the clinical response rate in this disease area. And we anticipate seeing at least that number of patients rolling over.

But we haven't really seen exactly what the number is that we believe will rollover..

Got it. Thank you..

We'll go next to Alan Carr with Needham & Company. Please go ahead..

Hi. Thanks for taking my question. Wondered if you could go over your NBD strategy at this point and your cash balances is getting bigger here.

So I'm wondering if your BD strategies is evolving? And then also, can you give us effective timing for the work that Mitsubishi is doing when INGREZZA in TD effects?.

So Alan I'll take that question, this Kevin. BD strategy remains the same as it has for the past couple of years. It just means that the size of opportunities that we look at have gotten larger.

So we are looking for and I would say in order of priority very good science that brings a meaningful health to possibility of bringing a meaningful product or products at two patients not [me twos] and not just incremental changes. And that our investors will appreciate the value that the transaction would bring.

So, there is a lot of great work that’s being done outside of America's four walls and we’re just very active in looking at all of that and we’ll be as creative as we need to be in order to do a deal. But it has to be the right deal and I think I just gave you the three broad swaps of where we look at.

As far as Mitsubishi is considering they are in a Phase III clinical trial now currently. I don’t have the timing of when they expect to read out from that trial yet, but they have been working very diligently towards that and it’s nice to have our partner in Phase III so quickly..

Thanks for taking for my questions..

Thank you. We’ll go next to Sumant Kulkarni with Cannacord. Please go ahead..

Hi, thanks for taking my questions.

My questions are around opicapone, so other than the dosing schedule, what are the key clinical hooks that could help to start of penetrate what is essentially a highly generic sized market, our results appears to be shrinking from an [indiscernible] or IMS scripts point of view?.

Right, could you repeat..

Sure, so on opicapone other than dosing schedule, what are the key clinical hooks that could help this product penetrate what seems to be a highly generic sized market that is shrinking from an [IQ] or scripts point of view?.

Everyone wants to jump in right now..

So, let me start with some of the clinical attributes that we think is going to be important from a patient point of view and then Eric and Matt will have comments on the elements here.

As you know opicapone is currently available already in Europe as in the hands of our partner BIAL and clinically what the Phase III program has demonstrated is a very favorable benefit risk profile associated with the efficacy improvement that we have seen and also the tolerability profile, particularly when you look at that in the context of the class of [COMT] inhibitors that are currently available and some of the inherent tolerability or safety risks associated with that class.

We do believe that given the burden of treatment for these patients with Parkinson’s Disease that once a day dosing is actually a very critical differentiator and we also know in our understanding of the Parkinson patient population, that there are still significant unmet medical need in the context of these motor fluctuations and that they can be very damaging given the unpredictability of how these fluctuations on off times comes on for patients with Parkinson’s Disease.

So we’re very excited about the opicapone and the new opportunity and value the dose can bring to patients. We believe we have a valuable best clinical data package that was put together by our partner BIAL.

In addition the other comment I had make is obviously one of the Phase III programs include is a direct comparison to the leading COMT inhibitor [indiscernible] and those performed very favorably in that comparison. So clinically, we’re very excited in that regard..

Yes, this is Eric. The points that I would add on to what Eiry made was that from a commercial perspective. When we looked at the opportunity, we view this molecule as essentially delivering on the promise of COMT inhibition.

Robust efficacy with a favorable tolerability profile and importantly once a day dosing, which are not options currently within the COMT class and the other drug classes that are out there have issues and we have certainly heard that from the movement disorder neurologist that we consulted with.

So we think that there is an opportunity to offer unique innovative therapy for these patients. And in addition, it's a nice strategic fit with our current platform for INGREZZA. And with the coverage that we have of essentially the entire movement disorder neurology community.

So we look forward to continuing to prepare for the launch as we file our NDA application next year. But we think that this is going to be an exciting opportunity for our team to demonstrate what we can do with our second product..

Thanks and now that you are close the filing could you share your latest thoughts on potential pricing of [decarboxylase] for a opicapone?.

No, we're not at a place yet to provide that insight. As we get closer to launch we'll provide insight as we get closer. Thank you..

Thank you..

Our final question comes from David Amsellem with Piper Jaffray. Please go ahead..

Thanks. Just a couple.

So first, have you -- or are you willing to disclose specifics from the statistical powered of the T-Force GOLD study? And then secondly, also perhaps related, do you have data on how many Tourette's patients are getting valbenazine off label? And then lastly, regarding the payer landscape in Tourette, can you talk about how much more restrictive it could be relative to tardive given that you have neuroleptics approved for Tourette? Thanks..

So, let me address the first and this is Eiry here. We have not articulated about detailed thinking about the power -- the calculation for this study.

I will say that the study given it's a pivotal study and provides the basis for our discussion with the FDA around the sNDA is adequately and strongly powered to deliver on the primary endpoint as Kevin articulated which is the change from baseline on Yale Global Tic Severity score for the treatment group compared to placebo..

Yeah, and I think the second half of your question was really related to what the payer environment might be like, for the Tourette indication. It's early days yet, and we've had some initial discussions with payers.

But I can say that they recognize that the currently available treatments are not being utilized to the extent that they could be simply because we're talking about antipsychotics being used in children. And there's a reluctance to use antipsychotics in children because of all the safety issues that we're all well aware of.

So, we're excited about the opportunity to bring a product to that patient population with a different mechanism of action and we think a favorable safety profile.

And we think that the plans will be reasonable, at least as to the expectation that we have so far based on our interactions in terms of making sure that patients have access to an effective safe treatment..

Thank you. It appears we have no further questions at this time. I'll turn it back to Mr. Gorman for any additional or final remarks..

Thank you. For over a decade, we've talked about INGREZZA, and ORILISSA as each one being a pipeline and a program. And now that fruition is coming through TD and endometriosis is just the first indications. For INGREZZA next comes Tourette and for ORILISSA uterine fibroids.

And stay tuned to both ourselves and AbbVie for even additional indications in the future with those. And in addition to those, our pipeline is robust with opicapone that we will be filing the NDA on next year and CAH which we're moving along.

If you -- this is a pipeline that if it just stayed static would result in four compounds on the market in the six indications in just four short years. But it's not going to say static. We're going to have more compounds continuously coming from our R&D group. And as I've told you, we still anticipate at least one more coming this year.

And as we've talked about on this call, we're very active on the business development front. So as enviable position and gosh, 10 years ago, I never thought we'll be in this position right now, but it is an enviable position but it's one that we continue to work at and we believe we'll just get better and better with time.

So in closing, I would like to again thank our partner AbbVie and I want to thank all of our Neurocrine employees. It's their dedication and talents that are the reason for our success and we really do look forward to many more successes in the future. So thank you very much for everyone's attention. It's been a pleasure speaking with you today..

Thank you. This does conclude today's conference. We appreciate your participation. You may disconnect at any time. And have a wonderful day..