Jane Sorensen - Executive Assistant Kevin Gorman - Chief Executive Officer Matthew Abernethy - Chief Financial Officer Eric Benevich - Chief Commercial Officer Eiry Roberts - Chief Medical Officer.

Geoffrey Meacham - Barclays Trevor Brown - Robert W. Baird Philip Nadeau - Cowen and Company Paul Matteis - Stifel, Nicolaus Anupam Rama - J.P. Morgan Charles Duncan - Cantor Fitzgerald Biren Amin - Jefferies David Amsellem - Piper Jaffray Jay Olson - Oppenheimer Alan Carr - Needham & Company Jeffrey Hung - Morgan Stanley.

Good day, everyone, and welcome to Neurocrine Biosciences Reports First Quarter 2018 Results. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during Q&A session. [Operator Instructions]. Please note, today’s call is being recorded and I will be standing by should you need any assistance.

It is now my pleasure to turn the conference over to Kevin Gorman. Please go ahead..

Good afternoon. And thank you for joining us. I'm here with Eiry Roberts, our Chief Medical Officer; Matt Abernethy, our Chief Financial Officer; and Eric Benevich, our Chief Commercial Officer. In our call today, we’re going to be making forward-looking statements. So, Jane, could you please our Safe Harbor..

Yes. 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, we enjoyed another good quarter on multiple fronts. First thing, INGREZZA continues to grow, and this past quarter was one where we focused on investing substantially in the product to ensure that we have this continued growth in the coming quarters and years.

As always, we’re dedicated to continued physician education and TD and increased TD awareness among patients and caregivers. Eric is going to give you a lot more detail on this in just a bit.

And then, also on the side of investment, our commitment to progressing and expanding our pipeline is evident in all of our existing programs, and the addition of two more molecules in the condition in the clinic. And Eiry will be updating you shortly.

In the past quarters, we have seen the results of our BD efforts now on both sides of the spectrum, from the commercial launch of ORILISSA for endometriosis by our partner, AbbVie to the kickoff of an exciting research collaboration with Jnana Therapeutics.

Now, we want to have plenty of time for your questions, so we're keeping our prepared remarks a bit shorter this time. And so, let's start with our brief updates with Matt..

Thanks, Kevin. Good afternoon and thank you for joining our third quarter 2018 earnings conference call. We made great progress during the quarter with our sales force expansion, introduction of two new internally discovered assets into our pipeline, and continuing to serve and develop the tardive dyskinesia market for INGREZZA.

During the third quarter of 2018, INGREZZA saw script volume increase to approximately 19,400 scripts, resulting in $111.3 million in net product sales. This compares to 16,700 scripts and $96.9 million in net product sales for the second quarter of 2018.

Through the first nine months of 2018, INGREZZA net product sales were $279.3 million compared to $52.1 million for the same period last year.

The 2,700-script increase from Q2 to Q3 was consistent with our expectations and aligned with what we had highlighted on our second quarter earnings conference call, reflecting steady new patient flow with overall TRx growth being slightly tempered by the short-term impact of our sales force expansion and seasonal dynamics.

Regarding net revenue per script for Q3, we experienced a slight decrease from approximately $5,800 per script in Q2 2018 to approximately $5,700 per script in the third quarter.

The decrease is primarily a reflection of the continued decline in scripts being filled as 240 mg capsules, partially offset by the benefit of the lower impact from the Medicare Part D donut hole.

Moving to our financial results for the third quarter of 2018, during the quarter, we recognized a profit as a result of the $40 million AbbVie milestone for the FDA approval of ORILISSA and our growing INGREZZA net product sales. Net income for the third quarter was $50.8 million or $0.52 diluted earnings per share.

Excluding the AbbVie milestone, net income for the third quarter was $10.8 million or $0.11 diluted earnings per share. This quarter led to a $62.5 million increase in cash and investments, bringing us to a strong cash and investment position of $820.6 million exiting the quarter.

Our evolving financial profile provides us great flexibility to make further investments, both internally and externally, that align with our company’s strategy to drive long-term shareholder value.

We will remain very disciplined in our approach to both internal and external investment, but believe we are well-positioned to continue to pursue exciting opportunities to discover and develop important medicines within neuroscience. Now, a few comments about the fourth quarter of 2018.

On the clinical front, as you saw on our earnings release, you should expect to see topline data from our T-Force GOLD Tourette syndrome study in December. For INGREZZA, we remain quite pleased by our progress and expect continued steady new patient demand, leading to an increase in overall script volume during the fourth quarter.

Our key focus during the quarter, as you'll hear from Eric, remains on our sales force expansion activities, including the training of our new sales colleagues and coordinating all of the formal territory handoffs.

We do expect our TRx growth to remain slightly tempered by these activities, but remain incredibly excited about our long-term potential at INGREZZA and how our sales force expansion will position us heading into 2019. The last items on our radar pertain to our net revenue per script.

We continue to expect our scripts being filled as 240 mg capsules to decline. In addition, consistent with others in our industry, we expect there to be an elevated gross to net discount in Q4 as a result of accounting dynamics associated with year-end channel inventory.

Regarding operating expenses for 2018, we are narrowing our guidance range to $410 million to $420 million as compared to our previous guidance range of $395 million to $420 million.

Our updated expense guidance range includes investment in our sales force expansion, to two new clinical programs and a recently announced research collaboration with Jnana Therapeutics. With that, I will now hand the call over to our Chief Commercial Officer, Eric Benevich. .

Thanks, Matt. And thank you, everyone, for joining us on our third quarter call. This is an exciting time at Neurocrine and especially for our commercial team. Q3 was another strong quarter for us with, as Matt said, over 19,000 dispensed INGREZZA total prescriptions and net sales of approximately $111 million.

Overall, I'm really pleased with our Q3 results and I am extremely proud of the commercial team's efforts and results in staying focused on serving patients with tardive dyskinesia and generating awareness with healthcare providers, while we executed our sales team expansion.

In terms of growth drivers, new patients starting INGREZZA treatment was at a pace consistent with prior quarters, showing continued demand for INGREZZA approximately a year-and-a-half into our launch. And we continue to build our prescriber base. Each month, we add new prescribers and our existing prescribers are expanding use within their practices.

There remains a lot of untapped potential in the TD market. And we believe we have barely scratched the surface. Let me provide you an update on some of the initiatives underway to continue to develop this market opportunity. Last April, we announced plans to expand our specialty sales team by approximately 50%.

The expansion decision was driven by the strong uptake in the early phase of the launch as our sales team had uncovered thousands of additional high potential healthcare professionals.

Given the size of our initial team and their ability to interact with healthcare providers, with the desired support and call frequency, it became obvious to us that we needed to expand our reach to cover the TD opportunity appropriately. Over the past six months, we have been extremely busy building our expanded team.

We screened over 4,000 candidates to ultimately hire, train and onboard approximately 80 high quality new sales team members. The new hires have now been integrated into our high-performing sales force and the expanded team is now busy settling in with their new customers and territory alignments.

This investment reflects our convention about the TD market opportunity and we believe our team will be well-positioned to grow our INGREZZA franchise in 2019 and beyond.

Another initiative I am very enthusiastic about is the launch of an educational campaign, “Talk About TD,” a television and digital pilot program which aims to help patients and caregivers understand TD and recognize the symptoms, learn about available support resources and have a conversation with their healthcare provider about ways to manage their TD.

The campaign is now being run in a handful of markets around the country as part of a pilot test. We’re monitoring the educational impact to determine if we extend the reach of the disease-based campaign more broadly through 2019. So, in summary, we’re dedicated to helping patients and educating healthcare providers about TD and INGREZZA.

We have a strong product profile that’s reflected in the favorable label for INGREZZA.

Product attributes such as rapid and sustained efficacy, combined with good tolerability, simple dozing featuring one capsule once a day without complex titration, no box warning and compatibility with common psychiatric medications are important considerations when selecting a treatment for TD.

We believe these attributes are why INGREZZA is the most preferred medication for the treatment of TD. We look forward to finishing Q4 and full-year 2018 strong to carry our momentum into 2019. So, with that, I’ll turn the call over to our Chief Medical Officer, Eiry Roberts, to provide you with an update on our clinical development 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 development programs. As Matt stated earlier, we remain on track to read out the clinical data from our T-Force GOLD study later this year in December.

T-Force PLATINUM study is also progressing to plan, with topline data expected in late 2019. In addition, the team continues to make great progress toward the anticipated opicapone NDA submission during the second quarter of 2019.

During today's call, I want to focus on our congenital adrenal hyperplasia, or CAH, program and highlight the two new clinical programs announced today. For our CAH program, the Phase II proof of concept study to evaluate pharmacokinetic, pharmacodynamics and tolerability in adult patients continues to progress.

We recently made the decision to increase the total number of patients participating in this study. This change is designed to assess an additional dosing schedule for the compound, with the goal of providing potentially more flexibility and convenience for patients. We anticipate sharing data from this study in the first quarter of next year.

With sufficient data in hand from the ongoing study, we plan to meet with the FDA to discuss the path forward for the clinical evaluation of NBI-74788 as a novel treatment for patients with CAH. Turning now to the two new programs that we announced today.

I'm pleased to share that we have filed an IND and initiated a Phase I study for another novel, internally discovered vesicular monoamine transporter 2, VMAT2, inhibitor as a potential treatment for a range of disorders in neurology and psychiatry.

We anticipate completing the single ascending dose portion of this study in healthy subjects during the fourth quarter of 2018. Based on our extensive knowledge of the role of the VMAT2 target, we plan to evaluate this compound in clinical development programs, targeted to several disease states with high unmet clinical needs.

In addition, we filed an IND and completed dosing in a Phase I, single ascending dose study for an internally discovered, first-in-class, CNS compound. This randomized double-blind study evaluated the safety, tolerability and pharmacokinetic profile of the compound in healthy subjects.

We are currently analyzing the data from this study to inform the design of the next studies in this program. The compound modulates a new target within the CNS and has the potential to provide benefit across a range of disorders in neurology and/or psychiatry.

In parallel, we continue to invest heavily in this target as part of our research efforts, including the identification of additional novel compounds. I'm excited about these two INDs and very proud of the efforts of our research and preclinical teams in getting these compounds to the clinic.

These efforts reflect our company's continued commitment to innovation and the integrated discovery and development of novel compounds designed to potentially address the significant unmet clinical needs that still exist for patients with neurological and psychiatric diseases.

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

Thank you, Eiry. And so, as you can see, we’re making progress in all facets of the company. What I'd like to do right now is open it up to your questions..

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

Hi, guys. Thanks so much for the question. Just have a few on INGREZZA for Eric or Matt.

The KINECT 3 extension study data, how well is this resonating with physicians and how broadly is it known in the community? I know you have some good trends on persistent rates, but I wanted to ask whether the data changes or further can augment those trends on persistence. And I have one follow-up for Kevin..

Yeah. Geoff, it’s Eric. I think the long-term data that we have has been really helpful, especially since we’ve had it available to us since we launched. And, certainly, it’s important for physicians to understand that INGREZZA can work and have a meaningful impact for patients within a few weeks.

But we always encourage them to give the patient an adequate trial, which, if you look at our data, we saw significant improvement at the end of the double-blind phase and it continued out into the open label extension and remained durable over the course of 48 weeks.

One other point that I think is valuable for the providers to understand is that when patients were removed from treatment that their TD symptoms returned to baseline within a month.

So, it's really been a valuable part of our messaging to show that INGREZZA can work quickly, but that you get durable responses as long as patients continue to take the medication as directed..

Okay. And for Kevin, you have the two new compounds announced today, which, obviously, expand the pipeline and you have economics coming from elagolix and INGREZZA is improving. So, I wanted to ask you maybe just a capacity question.

Do you feel like, with these new compounds, are you at capacity? Maybe just help us with the strategic priority of the new VMAT2 inhibitor versus looking at INGREZZA and other indications.

And just overall, is there still a willingness to maybe look externally for licensing opportunities or are you pretty much full at this point?.

Yeah. Geoff, I appreciate this question actually. It goes to what are our priorities in investment. And, obviously, our priority is that we’re the leader in VMAT2, not just with INGREZZA, but actually the biology of VMAT2 and the chemistry of VMAT2.

So, what you see here is that we continue to invest heavily in that, and that is always going to be the case. And that’s our number one priority that we have within the company. Number two, though, is expanding the breadth and depth of our pipeline.

And what we have done here with the two new compounds coming in, the Jnana relationship collaboration, is adding to the early stages of our pipeline, but we're still extremely active. And, no, we do have capacity in order to add on to the mid and later stages of our pipeline, and that's exactly what we're going to be doing.

You may be wondering how we’re able to do that. Well, one of the things is that it was very nice that we did not have to do additional Phase III clinical trials with opicapone. We were set up and ready to do those Phase III clinical trials. That opens up some capacity here with us.

We’re also making great progress in Phase IV trials that we don't often talk about with INGREZZA, and so we’re going through there. We have capacity and we will bring on more capacity, if needed, for the right opportunities externally..

Okay, thanks..

Our next question comes from Brian Skorney with Baird. Please go ahead..

Hi. This is Trevor on for Brian. Thanks for the questions.

I'm wondering if you could walk us through what you've been seeing in CAH that’s leading to the extension of timelines and how we should be interpreting the addition of the third cohort? Then also, what sort of Phase III trial design do you plan on proposing to the FDA? Have you had any preliminary discussions or received guidance in terms of what the study design should be?.

Eiry, how about you taking that?.

Yeah. Certainly, Kevin. Thanks so much for the question there. So, with the CAH program, we had a slower-than-anticipated start-off, but we've seen the trial really progress well in the recent months. And so, we are happy with the progress that we're making right now.

As you know, patients with CAH need to take their medication pretty much lifelong and we anticipate this being a chronic therapy. And as such, we are interested in exploring potential convenience and flexibility of dosing of this molecule as early as possible.

And so, we decided that we would like to do that in the context of this trial that's currently ongoing by looking at an additional dosing regimen in that trial.

We still plan to go with the proof of concept data at the beginning of this year – of next year to the FDA for discussions on the Phase III trial design, and we believe that the fundamental foundation of the Phase III program design will be a biomarker-based assessment as we are doing in our current ongoing study, only for a longer duration of time.

Obviously, the question of other potential endpoints including steroid optimization or other clinical endpoints will be a matter of discussion with the agency at that point in time, but we are confident in the current program as we have it ongoing and planning to go to the agency with our proof-of-concept data in hand sometime early next year..

Great. And just a follow-up, if I could.

Have you seen any seasonality yet in terms of new starts for INGREZZA?.

This is Eric. I believe that I touch on it in my comments, but the patient starts in Q3 has been consistent with what we've seen in prior quarters. It’s been very steady. And we’ve been pleased with the growth..

Great. Thanks so much..

Our next question comes from Philip Nadeau with Cowen and Company. Please go ahead..

Good afternoon. Thanks for taking my question. I want to ask on the T-Force GOLD study.

Can you remind us of the design in the trial and specifically doses 1, 2 or 3 in the valbenazine arm? How are those determined for the patients?.

Eiry?.

Thank you for the question. So, T-Force GOLD is a dose optimization trial for each individual patient. And each patient goes through a dose optimization for the first six weeks of the trial and they are able to escalate their dose week two or week four.

And then, the dose that the patient is on week six is then fixed for the duration of the trial out to 12 weeks, which is when the primary endpoint occurs. And by means of background, we undertook this design of dose optimization based on the learnings from our previous smaller studies in Tourette, and we remain very confident with our trial design.

As I said, we anticipate having the data at the end of this year; and then, following on from that, we will take those data to the FDA for discussions about the path forward for the sNDA..

Phil, that trial design should sound familiar to you when we were doing the KINECT 2 study, which was our first pivotal study in tardive dyskinesia. We took the very same approach..

Got it, okay. And then, just one follow-up actually for Eric. Eric, you mentioned some disruptions that happened in Q3 that impacted script growth, script trends.

Can you quantify for us? So, if possible, how much was – how large was the seasonal disruption? How large was the sales force disruption? Any sense of the impact of those would be helpful?.

I’d love to, but we actually can't quantify it. We do know that going through an expansion of – a substantial expansion of this nature where we increase the size of our sales force by 50% involved pulling a lot of people out of their day jobs. We spent a lot of time screening candidates. We had managers that were involved with the recruiting.

We had our sales force involved with assisting with the training. So, there’s a lot of time off territory. Certainly, we’re now past that hiring and training phase and we’ve got all of our folks now in their new territory alignments.

Everyone is busy handing off customer relationships where changes have been made in terms of who is the person that’s now calling on that account. And we’re looking forward to getting past all this. But we can't really quantify it.

We just know that, certainly, when you go through a change of this magnitude that there is the potential for distraction, and we certainly took steps to minimize that. And I'm really pleased with the way that my team performed..

Yeah. And I’ll just add on to that, Phil. And as we’ve described, we continue to expect the slope of the growth curve to continue to go up. It’s just a question of how steep or is there any pressure on that curve.

In a growth launch like this, it’s really hard to tease out specific variables and measure exactly how much one thing either helped or tempered growth. But as Eric alluded to, in aggregate, we did see some amount of pressure, but it was very much in line with what we had expected and really proud of what the team was able to accomplish this quarter..

Great. Thanks for taking my questions..

Our next question comes from Paul Matteis with Stifel. Please go ahead..

Great. Thanks so much. Appreciate the questions. Just one question on what you're seeing with persistent. I interpreted Eric's comments that new patient starts were consistent, but script growth this quarter was something like 16% versus over 30% sequentially last quarter.

So, am I reading this right that that delta is totally due to a declining refill rate or is there – or should I be thinking about that differently? And then, separately, on CAH, a question for Eiry.

I was wondering if you had any idea on what’s a clinically meaningful reduction in 17-OHP or clinically meaningful change in androgen or cortisol or some of the other biomarkers you're looking at? And what’s sort of the hurdle rate for something that would get you excited with that compound? Thanks so much..

Hey, Paul. It’s Matt. I’ll take your first question and then I’ll let Eiry jump in there. So, when you tease apart our growth for the quarter, like I said earlier on with Phil, it's really hard to dissect the exact cause of a slowdown and then sometimes exact cause of a tailwind.

But what we did see, as Eric said, is very steady new patient growth and demand. Sometimes, the timing of when those patients show up matters and how much they impact the quarter. And then, you're right, the other two variables pertain to sequential differences in refill rates from Q2 to Q3. So, as you mentioned in your comments, that’s the math..

Well, thanks, Paul, for the question around CAH. As you know, there’s not been a great deal published in this area about clinically relevant changes in biomarkers.

But I can refer you to a previous study that we did as a single dose study in women using a previous CRF-1 antagonist in which we saw about 50% of the population had approximately a 50% reduction in 17-hydroxyprogesterone and ACTH levels. And we were certainly excited with that degree of change.

And I think if we are able to see anything similar to that in the context of what is now a study with our new molecule that is over 14 days of dosing, so allows us to get to a steady state inhibition of the CRF-1, then we'd certainly be thinking that that would be very clinically relevant and would be very much worthy of moving forward with discussion..

Okay, thanks.

Just to clarify, is that kind of change in 17-OHP on top of a stable regimen in steroids or are you also looking at changing the steroid burden too?.

In the current studies, the steroid burden is not changed.

I think, moving forward, the whole opportunity for this medicine in the long run for patients is to be able to return to physiological – more physiological doses of glucocorticoids because, obviously, the high-dose glucocorticoids that patient have to take with this condition over a long period of time are significantly detrimental over time..

Okay. Thanks so much. That’s helpful..

Our next question comes from Anupam Rama with J.P. Morgan. Please go ahead..

Hey, guys. Thanks so much for taking the question. Wondering if you can comment on any color on competitive dynamics with Aceto worth noting in the quarter as well as how you’re thinking about that competitive dynamic going into 2019? Thanks so much..

Hi, Anupam. It’s Eric. So, obviously, there's another company that is in this category. We don't comment on what they're doing and, certainly, I don't hear a lot from customers myself. We’re staying focused on growing our INGREZZA franchise and we've gotten off to a really good start with our TD launch.

And it’s important to note that we’ve barely yet penetrated the significant pool of undiagnosed and untreated PD patients. I mentioned earlier in my prepared comments that INGREZZA is the most preferred TD therapy and we’d be ourselves as the market leader.

We have a great product and I am very confident that we’ll continue to grow our business in the coming months and years. And I think that's really the investment that Kevin was talking about earlier..

Great. Thanks for taking our question..

Our next question comes from Charles Duncan with Cantor Fitzgerald. Please go ahead..

Hi, guys. Thanks for taking my questions and congrats on another good quarter of progress with INGREZZA sales. I had a quick question for Eric and then one for Eiry.

Eric, regarding maybe the last question in terms of prescribers, psychs versus neuros, are you getting more or less traction with neuros versus psychs in the past? And what kind of new cohort of prescribers would you target with the increased number of sales people?.

Yeah. Thanks for the question. So, if I'm understanding you right, are there any sort of shifts in prescribing patterns or the mix of business? I would say no. We’ve said previously that about three quarters of our promotional efforts have been against psychiatry. The balance going against neurology.

We’re continuing with that ratio essentially, but we’re able to go deeper into both of those customer segments.

With having smaller territories, what I mentioned earlier is that we had identified thousands of additional high potential healthcare professionals over the course of the first six to nine months of our launch, and it became obvious to us that we couldn't reach everyone with the desired level of customer support and frequency that we wanted.

And so, this expansion allows us to really call on those individuals more frequently and to cover more of those audiences. And so, I think that the ratio that we have talked about earlier still holds up. It just allows us to go deeper in both of those customer segments. The other dynamic you mentioned was, is there any sort of emerging customer types.

I don't know if it really qualifies as an emerging customer type, but we’ve certainly learned about the importance of allied health professionals and the extended care team, especially in behavioral health centers and the importance of educating everyone about induced movement disorders in general and about tardive dyskinesia, in particular.

And what we found is that it really does require the involvement of more than just the psychiatrists or the neurologists.

Educating the nursing staff, educating the social workers, et cetera, about abnormal movements and what to look for and how to document, so that patients can get an appropriate differential diagnosis, that's been a big part of our focus and that's really what’s driving our success..

That’s helpful added color. Thanks, Eric. And then, just a quick one for Eiry. With T-Force GOLD coming out with the Tourette's syndrome data, I just am kind of wondering what you're picturing in terms of the sNDA timing.

Would that be with the T-Force GOLD data or would it be T-Force PLATINUM data driven? And then, thoughts regarding the broader patient population. Would you anticipate filing an sNDA relative to the patient population you're studying in T-Force GOLD or perhaps more broadly? Thanks..

Thanks for the question. So, our base case understanding is that the two pivotal clinical trials may be necessary for the sNDA. So, that would include T-Force GOLD and T-Force PLATINUM. And as I mentioned, T-Force PLATINUM will read out at the end of next year.

However, having said that, we think it's really important to look at the strength of the data that we have and we will go to the FDA with our benefit risk profile from T-Force GOLD in hand to strongly advocate for the path forward for a single study for the sNDA if it's appropriate to do so on the basis of the data.

And then, we anticipate the indication as being for treatment of pediatric and adolescent with Tourette. That's the population that we studied in the trial..

Okay, thanks for the added information..

Our next question comes from Biren Amin with Jefferies. Please go ahead..

Yeah. Thanks, guys, for taking my questions. Just one question on INGREZZA.

How is the compliance rate – patient compliance rate in Q3 relative to Q2? And are you seeing any off-label use?.

Hi, Biren. Thanks for the question. And look forward to seeing you next week. As it relates to compliance, as we said earlier, no dramatic change in level of compliance. What we’re finding with patients who are on drug with INGREZZA, their compliance rate is a bit higher than what their normal use of antipsychotics are.

As we’ve said previously when we did our studies of these patients, prior to launch, we saw that their compliance rate would be around 50% to 60% of the time they would actually take drug. We continue to see compliance rates above that, but no meaningful change from Q2 to Q3.

As we talked about before in Q1, there usually is a bit more impact in compliance rates in Q1 just because of dynamics of plan changes. So, when you compare a Q1 to Q2 compliance rate, you may see a bit of a step up, but we didn't see any remarkable difference from Q2 to Q3.

As it relates to off-label use, as we’ve said before, we do here anecdotes, but they're very isolated about off-label use. And it's something that we, obviously, cannot promote and we do not incentivize our sales force either to push for anything off-label.

So, what we do here or get feedback on is just purely anecdotal and would say it shouldn't be considered widespread..

Got it. And then, maybe a question for Eiry. As you mentioned, you may need T-Force PLATINUM as a possible second trial.

Have you had discussions with FDA on the receptability of the trial design, given you're using a randomized withdrawal trial design and something that FDA recently looked at with the Alkermes compound in depression?.

Thank you for the question. As we mentioned, I think, earlier in the year, T-Force PLATINUM was not initiated on the basis of any interaction with the FDA at that point in time. However, we do know that the FDA has asked for randomized withdrawal trial within this patient population previously as part of a sales force commitment around Abilify.

And we do believe that that this trial design answers a very important different question from that which is answered by the parallel group control. Also, the design of the T-Force PLATINUM study is entirely different from the Alkermes trial that was performed as part of their depression program.

It really is a trial in which patients are treated out to 12 weeks; and then, when we know that patients have responded to the medication, then they are randomized to either receive placebo or active in the ongoing part of the trial. So, it's very different in its design. We’re confident in the design.

We know the FDA has asked for those designs before in this indication, and so we’re confident in the package that we’re putting together here..

Got it, thank you..

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

Thanks. So, I have a question about the payer landscape.

So, as the footprint for INGREZZA grows in tardive, can you talk about how you expect the payer landscape to evolve? And this is really more of a long-term question, do you expect over the next two to three years that their landscape will become more restrictive or that you might see widening gross-to-nets? And, I guess, as a corollary to that, to the extent that you get a label expansion in Tourette's, bearing in mind that there's three antipsychotics already approved, what's the extent to which the payer landscape will be restrictive in that setting and how should we think about that? Thanks..

Okay. Hi. It’s an important topic. Patient access is important to us. And we've been pleased – and I think we’ve said this before with the payer coverage in the early part of our launch. So far, approximately, 8 out of 10 written prescriptions have been filled and over three quarters of the patients paid $10 or less per month.

So, this is a drug that is affordable and accessible. It doesn't mean that we can let our guard down.

We said that we’ll contract with payers where it makes sense to enhance access and we’ll continue to evaluate contracting opportunities on a case-by-case basis going forward, and we’re going to continue to monitor the landscape through the balance of this year and into 2019.

So, it’s something that’s critically important for the success of INGREZZA to make sure that it's accessible to patients. But so far, so good on the payer front. With regards to Tourette, it’s a little early, I think, to get into the potential dynamics there. You mentioned that there are approved treatment options. That is true.

However, there are significant challenges with some of those treatments, and they're underutilized, I think, as a result. And so, we got a lot of work to do once we have the clinical profile of INGREZZA or valbenazine in Tourette to really understand what the potential challenges might be and how we want to address those going forward with payers.

But I think that we’ve built up some credibility with pairs with the work that we did prior to the approval of INGREZZA in TD, educating them about the company, about TD, about the potential utilization of our medication in that patient populations.

And likely, we’ll go down that path again with payers in the months and quarters leading up to our eventual planned PDUFA date in Tourette. So, I think it's a little bit early to comment on that, but stay tuned. I think we’ll have a little bit more to say once we get further down the road..

That’s helpful color. Thanks..

Our next question comes from Jay Olson with Oppenheimer. Please go ahead..

Hi, guys. Congrats on the two new clinical programs. Can you talk about how your next-gen VMAT2 inhibitor will be differentiated from valbenazine in terms of its clinical profile and/or the indications you plan to pursue? And then, I have one follow-up question..

Jay, I’ll jump in first on this, is that we’re not going to – and I know it can be a little bit frustrating, but I think you can understand, for competitive reasons, we’re not going to be going into detailing out the differences between the new clinical compound, VMAT2 inhibitor and INGREZZA.

And for those same reasons, we’re not going to be detailing what the clinical indications are that we’re going to be going after that. You'll learn more about this basically in two different ways.

As it progresses through the Phase I programs, you're going to hear that we have – we're starting multidose, we’re going on, and then we’re going into Phase IIa studies. That's how you're going to keep track that we are progressing here.

You will then see, as we go into patient populations, you're going to see on clinicaltrials.gov that that’s going to be elucidated. So, again, for competitive reasons, we’re not going to be releasing too much data until we’re further down the line..

Okay, thank you. I totally understand and appreciate your communication strategy there. And then, just as a follow-up, I think you mentioned in the prepared remarks that there were still a few patients in the third quarter who were taking two of the 40 mg doses of INGREZZA.

Can you give us an idea of what one impact that could have on the fourth quarter net pricing if all those patients were to convert to a single 80 mg INGREZZA dose? And then, also I think you mentioned the gross to net might widen a little bit in the fourth quarter? Can you give us some idea of what you're expecting there?.

Yeah. Thanks, Jay. And appreciate the question. Last quarter, if you recall, we said that our mix of scripts going out the door, and I believe I said in Q3, was in the mid-single digit range and we expected that to continue to bleed down throughout the year. So, this phenomenon is what we had expected, but just highlighting it.

So, we’re now in the lower single digits and continuing to progress through that and unexpect to progress through that this quarter and partially into next year. So, it probably has, call it, $150 to $200 net revenue benefit per script at this point and we would continue to expect that to go down over time.

And then, as it relates to the accounting dynamics associated with channel inventory, if you recall, the accounting, you have to think about where your channel inventory is going to get – who it’s going to get consumed by.

So, any channel inventory sitting on your books at the end of the year that's been recognized as revenue, you know that gets consumed in the first quarter, which typically has the largest gross-to-net hit because of donut hole or commercial co-pay assistance dynamics.

So, we carry right around industry standard, below two weeks of inventory on hand, but not going to disclose the exact estimate as we’ll have to work through that as we come to the end of the quarter..

Okay, great. Thanks for taking the questions..

Our next question comes from Alan Carr with Needham & Company. Please go ahead..

All right. Thanks for taking my questions. I'm wondering, talk a bit more about the direct-to-consumer disease awareness.

Any early sense of impact that’s having in those specific markets? And then, maybe you can comment a bit more about the Jnana deal and what you're hoping to – what you're hoping will come from that?.

Yeah. I guess, I’ll take the first part of the question. Thanks for the question, Al. So, I mentioned earlier that we’re excited about the opportunity to do a unbranded disease state education pilot. It’s called “Talk About TD” and it’s both television as well digital.

So, I encourage you, if you want to learn more, to actually visit the website and you can see the content there.

But, essentially, what we've done is to develop an ad that educates the target audience, which is individuals that have been on dopamine-blocking drugs, primarily anti-psychotics that may be experiencing abnormal involuntary movements, and educate them about tardive dyskinesia, with the call to action to be both visit the website or call the toll-free number to get the information kit and/or speak to their neurologist or their psychiatrist to learn more.

So, we believe that there is a tremendous gap between the diagnosed TD population and the prevalent population, and this is just another vehicle for us to be able to educate both the patients and their loved ones and caregivers to encourage them to have a conversation with their physician and ask, might these movements be TD.

So, whether the conversation is initiated by the consumer on the one hand or by the healthcare provider on the other one, as long as those conversations are happening and people are getting appropriately diagnosed, then this is a win certainly for the company, but it's also a win for the patient population with TD and we’re excited about that opportunity.

So, stay tuned for more as we evaluate the educational impact of this program and look at a broader rollout in 2019..

The answer there was, it sounds like it’s too early to tell in any of those select markets where you're tracking this..

Yeah. I would say that the early returns are promising. That’s an election joke. Yes, it's too early to tell, but we’re enthusiastic about this opportunity. And, certainly, the fact that we’ve made this investment, I think, is commensurate with our conviction about this TD market..

Now, Alan, on to the second part of your question, which was about Jnana, there is a very impressive team at Jnana. This is a real quality company. And they are built on the first drug discovery platform dedicated to targeting SLCs, which are solute carrier family of transporters. There are more than 400 proteins found in the membranes of cells.

And conventionally, scientists have only been able to study them one by one. Same as us. As a point of reference, VMAT2 is an SLC. So, this is, obviously, a protein target that we’re very interested in. And in addition, Jnana now can systematically research the broader repertoire of SLC transporters in an unbiased fashion.

So, I think that, for the first time, not only can you deal with multiples of these SLCs in the drug discovery platform, but your ship rate should be higher because you’re not biasing your assay in any way. So, we are working together with Jnana in this collaboration to discover small molecules across multiple targets of CNS disorders..

Great. Thanks very much..

Our next question comes from Jeff Hung with Morgan Stanley. Please go ahead..

Thanks by for taking the questions. For the new sales hires already in the field, what proportion of their customers have they visited? And have any of those customers been visited multiple times? Then, I have a follow-up..

So, they've only been in the field for a few weeks. I'm saying for the new folks. The way I would sort of describe this transition process is that all of the approximately 140 or so territories that we had prior to the expansion have been impacted. We did the realignment. We shrunk the territories.

There has been, obviously, changes in customer relationships. There's also been changes in reporting relationships.

There's been promotions that have occurred as a result of this expansion, and so we’re going through the process of – where there's a new person that’s stepping into a given geography, making sure that the legacy salesperson has been helpful in terms of introducing them to existing customers and effecting those customer handoffs.

They're also in the process of calling on folks that have not been called on previously or have been called on previously, but not frequently enough. So, it’s a mix of things. But the new folks have only been out in the field for a few weeks now. The feedback has been very positive. There's a lot of excitement, and it's palpable.

I can tell you that just – I think the week before last, I was down in Orlando at the US Psych Congress where were we had a number of different promotional activities. We had a booth where there was a really high booth traffic, and this is a psychiatry congress. But really good traffic at our booth, really good conversations that were occurring.

And, certainly, I was really pleased to see the high turnout at the two events that were sponsored by the company. There was an independent medical education program that had over a thousand healthcare professionals in attendance. That was a grant that was sponsored by Neurocrine.

And, separately, a product theater the next day that was standing room only. So, high interest certainly and a lot of enthusiasm from both the new people and from the legacy team in terms of what we’re doing and the response and the feedback we’re getting from the medical community..

Great, thanks. And then, you talked about the ratio of specialists you're targeting.

But as you go deeper into both psychiatrists and neurologists, is the underlying script volume still coming from about 80% psychiatrists and 20% neurologists or has this begun to change over time?.

So, it’s still proportional to the call activity. And we’re just able to go deeper into both neurology and psychiatry because we recognize that there was high potential healthcare professionals that we just weren't able to see at all or as frequently as we would like. So, that ratio or split of business is still the same.

We’ll continue to monitor how things evolve over time. It’s very early days yet with the sales force expansion, but I don't expect, given the call points and the call pattern, that it’s going to alter very dramatically going forward..

Thank you..

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

Thank you very much. As you can see, we made a lot of progress in this last quarter. This is, as I started out with, yet another good quarter for us. Now, we are looking forward to making additional important strides in the remainder of this year.

First and foremost, increasing the number of patients whose lives can be changed with INGREZZA, the readout of Tourette T-Force GOLD trial, and then continued progress with CAH and moving the two new pipeline products forward. So, there's a lot on our plate. There's a lot that we’re going to be talking with you about.

And I just want to say that we look very forward to speaking with you in the remainder of the year and into next year at the conferences. So, with that, I thank you very much for your attention. And take care..

This does conclude today's conference. We appreciate your participation. You may disconnect any time and have a great day..