Hello and thank you for joining the Neurocrine Biosciences Reports First Quarter 2019 Results. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during a Q&A session. [Operator Instructions] Please note this call may be being recorded.

It is now my pleasure to turn the call over to Kevin Gorman, CEO. Please go ahead..

Thank you very much and thank you, everyone, for joining us this afternoon. Here I'm joined by Matt Abernethy, our CFO; Eiry Roberts, our CMO; Eric Benevich, our Chief Commercial Officer; and also Kyle Gano, our Chief Business Development Officer.

Before I get started, Jane, will you please read our Safe Harbor statement?.

Yes. Good afternoon. 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 our forward-looking statements is contained in the company's SEC filings, including, but not limited to, the company's first quarter 2019 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 very much, Jane. I'm sure everyone saw our press release this morning or this afternoon. This was the first time INGREZZA moved through a turn of the calendar year where we have a substantial amount of patients on the medication. So, while it's not our first Q4 to Q1, it is quite a different Q1.

As has been the case since launch, we again saw a number of patients on INGREZZA grow. And as we've discussed a number of times, Q1 posed seasonality challenges as it relates to the timing and the process associated with payers.

It takes time for our patients to be reauthorized by their insurer, and therefore, because of this, we see a delay in refills for existing patients and we see a delay in getting new scripts filled. This leads to fewer scripts for patients during the quarter, but the vast majority is this impact occurs in the first six weeks of the quarter.

Now, this is all largely behind us. We've exited the quarter very nicely with the greatest number of new patient starts in Q1 than we've ever seen beforehand. We look forward to continuing to be the leader in treating TD patients. Now, Matt and Eric will be putting a much finer point in more detail around these trends.

In addition, in Q1, there are a number of other very promising results that we shared. The encouraging interim results from our Phase 2 study in adults with CAH and our collaboration with Voyager became effective last month, and the teams have begun working together.

This will add meaningfully to our pipeline with a new significant therapeutic modality for neurological diseases and disorders. And Eiry will be speaking to you about this in just a bit. So, we try to keep our prepared remarks short, so that there's plenty of time for Q&A afterwards.

And so I'll hand it over to Matt to give us financial update on the quarter..

Thank you, Kevin. Good afternoon and thank you for joining our first quarter 2019 earnings conference call. During the first quarter of 2019, INGREZZA saw script volume of approximately 24,200 scripts resulting in $136.4 million in net product sales.

As Kevin mentioned earlier, across our industry, the first quarter inherently poses unique seasonal challenges due to insurance plan changes, co-pay and deductible recess, and payer dynamics that can impact both demand and gross to net discounts.

During January and February, these seasonal challenges had a direct impact on patients' ability to get access to INGREZZA. INGREZZA is a specialty tiered drug, which typically requires a reauthorization at the turn of the calendar year or when a patient changes insurance plans.

These dynamics put pressure on our patients, pharmacies, and prescribers to navigate the process of getting INGREZZA leading to a delay in script fulfillment. Our field sales team did a tremendous job managing through these dynamics during the first two months of the year leading to a strong TRx growth trajectory exiting the quarter.

Importantly, all of these efforts by our field sales team and also our other educational initiatives resulted in a record number of new patients getting access to INGREZZA.

As expected, we also experienced larger gross to net headwinds as a result of the Medicare Part D donut hole and commercial co-pay assistance that came in slightly better than our expectation of a $6 million to $8 million impact.

These headwinds were partially offset by the full quarter benefit for the price increase taken on INGREZZA during early December 2018. Moving now to our financial results for the first quarter of 2019. During the quarter, we recognized a loss of $102.1 million or a loss of $1.12 per share.

Our loss was primarily driven by $113.1 million of IPR&D in connection with our strategic collaboration with Voyager, which closed in March. Excluding the IPR&D expense for Voyager, we realized a profit of approximately $11 million. Our R&D and SG&A operating expenses, excluding the Voyager IPR&D, were $125.2 million during the first quarter of 2019.

Specific to the Voyager transaction-related accounting, we recognized $113.1 million in IPR&D reflecting $115 million upfront payment and $2.8 million in transaction costs, which were slightly offset by $4.7 million in equity premium.

In addition, we recorded a $50 million equity investment as a $54.7 million asset on our balance sheet based upon the fair value at the timing of the collaboration closing. Regarding cash and investments, we exited the first quarter with $700.8 million compared to $866.9 million at the end of 2018.

The reduction in cash pertains to $115 million upfront licensing payment and $50 million equity investment for the Voyager Therapeutics collaboration.

For the second quarter, our commercial focus on INGREZZA remains the same, to continue to expand the awareness of TD to tardive dyskinesia educational efforts with healthcare providers and with patients. We continue to invest in speaker programs, educational materials and our, Talk About TD campaign.

As Kevin and I highlighted earlier, we are encouraged by how our team navigated seasonal pressure early in the quarter, and the momentum seen exiting the quarter. We look forward to seeing many of you over the coming weeks, and keeping you updated on our progress across all areas of our company.

With that, I will now hand the call over to our Chief Commercial Officer, Eric Benevich..

Thanks, Matt. I'd like to start by saying that I'm very proud of the execution of our customer-facing teams in Q1. As Matt said, we delivered over 24,000 total prescriptions. And over $136 million net product sales. At the beginning of the quarter, we indicated that we expected certain payer challenge, and this proved accurate.

Challenges as a result of payer-related seasonal dynamics are a common occurrence with branded prescription medicines, particularly with specialty products. Seasonal payer dynamics include patient health plans switching, out-of-pocket contribution resets, and plan requirements for annual recertification for specialty medication.

The impact of these dynamics resulted in delayed INGREZZA prescription bills for new and continuing patients primarily in the first half of the quarter. However, our teams worked diligently with our healthcare provider customers to address these payer barriers, to get patients started or restarted.

And we were able to work our way through the seasonal issues, Kevin mentioned. Formulary changes, which can and do occur throughout the year, did not have a meaningful impact on our Q1 results. And we remain very pleased with our plan coverage. Launch to date approximately 70% to 80% of written prescriptions get dispensed.

INGREZZA remains affordable for patients with 3/4 of patients paying $10 or less per month out of pocket. And INGREZZA is covered for approximately 90% of planned lives. We're committed to ensuring patients have access to INGREZZA, and have worked and continue to work diligently with payers to ensure appropriate coverage policies.

INGREZZA is the most prescribed drug for patients with tardive dyskinesia. And we continue to see strong demand. In Q1, we saw record new patient starts. We feel optimistic about the continued growth prospects of INGREZZA. And believe that we have only just begun to help the many thousands of TD patients that can benefit from treatment with INGREZZA.

So with that, I'll turn it over to our Chief Medical Officer, Eiry Roberts..

Thank you, Eric, and good afternoon to everyone on the call. I'm pleased to talk with you about our growing and maturing clinical pipeline.

For INGREZZA, we plan to present data at the upcoming American Academy of Neurology and American Psychiatric Association meetings, including quality-of-life data from the recently completed RE-KINECT study, demonstrating how patients perceive the impact of possible TD as well as the impact of the condition on patients' daily lives and activity.

We continue to make excellent progress on opicapone, the catechol-O-methyltransferase inhibitor intended for the treatment of multi-fluctuation in patients with Parkinson's disease and remain on track for a submission to the FDA this quarter.

For CAH, the adaptive Phase II, proof-of-concept study, examining the pharmacokinetics, pharmacodynamics and tolerability of NBI-74788, in adult patients with classic 21-hydroxylase deficiency, remains ongoing.

We recently announced positive interim results from this study, evaluating the impact of NBI-74788, on key biomarkers associated with the disease of CAH and its management.

We were very encouraged by these data, which demonstrated a meaningful reduction in levels of ACTH, 17-hydroxyprogesterone and androstenedione in subjects receiving 14 days of dosing with NBI-74788.

With these data in hand, we plan to meet with the FDA to discuss the registration program for the evaluation of this molecule as a novel treatment for patients with congenital adrenal hyperplasia. We also plan to initiate clinical development of NBI-74788, in pediatric patients with CAH later this year.

In January 2019, we entered into partnership with Voyager Therapeutics, to develop 4 gene therapy programs, including the lead program providing a gene therapy approach for the treatment of multi-fluctuations in Parkinson's disease, by a replacement of a key enzyme in the production of dopamine from levodopa in the brain, AADC.

We are currently working very closely with our colleagues at Voyager, to progress this program in the clinic, and to bring forward subsequent programs, including efforts targeting tardive dyskinesia.

Turning now to our novel, internally-discovered vesicular monoamine transporter 2, VMAT2 inhibitor with potential for use in the treatment of a broad range of neurosciences orders, we remain on track with this molecule, and recently completed dosing as planned in a Phase I study.

This study was designed to assess the tolerability and pharmacokinetics of single- and multiple-ascending doses in healthy subjects. We will provide further updates, as we continue to progress this program in the clinic. I'm very pleased with the progress made this quarter across our clinical development efforts.

I will now hand the call back to Kevin Gorman, our CEO, for closing..

Thank you very much, Eiry. So at this time, we'd like to open up the lines for your questions, please..

[Operator Instructions] And we will take our first question from Geoff Meacham with Barclays. Please go ahead. .

Hey! guys. Congrats on the quarter.

Can you hear me though?.

Yes. We can Geoff..

Okay, perfect. So, a commercial question and a clinical question. So Eric or Matt, I know it's tough to separate seasonality from the DTC investments that you've made in the sales force build out.

But maybe if you had any metrics that you can give us that will show that the -- or can show that these investments are on track or anything that shows that maybe the initial benefit from them? And then I have a follow-up on the clinical side..

Yes. Hey, Geoff. So with regard to the sales force, we're very pleased with the progress that we’ve made in terms of integrating the new members of the sales team. And certainly, we've seen a lift in terms of the kind of activity that you want to see, calling on health care provider targets, increased peer-to-peer program activity and so on.

We may recall that they were deployed shortly before the holiday season last year, and then we're really hitting our stride, I think, coming into Q1. I think that we started to see the benefit of the expanded sales team, especially with regard to new patient starts. As we said, Q1 was a record for us in terms of new patient starts.

With regards to the DTC program for tardive dyskinesia, it's still early days yet. It's only been on the air since I want to say, mid-January. And it takes time for awareness to build with this kind of program.

But I will say that we've been very pleased with the response that we've seen thus far in terms of unique visitors to the website, people downloading information and registering to receive more. So that's the kind of thing that you want to see with this type of campaign. And certainly, we think that it bodes well for the future..

Okay. That's helpful. Thanks Eric. And Eiry, you mentioned the next-gen VMAT2 inhibitor. And you guys are obviously doing some of the initial dosing in healthy volunteers.

But can you just -- if you had a roadmap of what we could expect in the back half of the year, when we'll go into patients, I believe you guys have said you're going to go after more orphan-ish indications that are -- that have a movement component to it. But maybe any additional color you can give us on that would be really helpful..

Thanks, Geoff. We finished the Phase I dosing in this first study on track, as I mentioned. And we are continuing to progress the molecule. We believe, obviously, this VMAT2 target is a very important target with potentially broad application across multiple potential neuropsychiatric disorders.

And we are considering all of those in the context of our path and plan forward. We obviously have some idea about our initial focus. And as we get closer to that and as we decide out on our initial Phase II plan, that will be on clinicaltrials.gov, and we'll obviously be talking more about that at that point in time..

Okay. Thank you very much..

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

Hi. Thank you. This is Jack Allen dialing in for Brian. Thank you again for taking our question. Our question was more on the VY-AADC data. We know that was published in late March of this year. We're wondering if there are any key takeaways from that publication that you wanted to point us to with respect to that. Thank you..

And thanks for that. I'll take that question. It's Eiry here. We have obviously been diving deeply into the clinical data in its entirety around the AADC program. We're very pleased with the consistency of the data that has been seen in the initial dosing in the Phase I study.

I think we are very encouraged by the fact that we see a consistency in terms of the correlation between the MRI coverage that we see in patients, the PET data that illustrates the activity of the enzyme following the gene therapy approach and how that then translates into clinical outcome data later in terms of improvement in quality ON-time, reduction in OFF-time and as a quality-of-life benefit.

We are incorporating all of the learnings from that into the RESTORE-1 trial, which is the ongoing placebo-controlled randomized trial. And we'll be doing so further into the -- as we plan for the RESTORE-2 next Phase II/III clinical study and any further react -- interactions we may have with the agency around that..

Awesome. Thank you so much..

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

Great. Thanks so much for taking the questions. Drilling to the whole seasonality question a little bit further in kind of the back half of the quarter, I was wondering if you could quantify or at least speak qualitatively to how March looked in terms of total script growth as compared to what you were seeing in the back half of 2018.

And then I have one follow-up. Thanks..

Yes. Hi, Paul. This is Matt. Yes. So the whole factor of seasonality is not unique to Neurocrine. As we look at different case studies across many other drugs, you see quite a bit of pressure in January and February and then see a natural lift.

So we're very pleased with what we saw and the effort that the team undertook to get scripts filled in January and February and then how we were positioned coming out of the quarter. We're not in a place where we want to specifically quantify that for you.

But as Kevin and I and Eric have all said, very encouraged with what we saw, encouraged also with the quality of that, given that we had a record number of new patient starts within the quarter, but don't plan on giving any specific, quantitative measure as to what we saw in March..

Okay. Fair enough. And maybe just one question on formulary access and contracting. The Express Scripts formulary decision came to -- came as a surprise to a bunch of analysts and investors. I guess, I was wondering if you guys were surprised by this decision.

And then just looking forward, do you have visibility into how this process is evolving with other payers and whether or not other payers might go that the more strict exclusivity decision route, which hasn't really been the case outside of Express Scripts to date? Thanks..

Yes. Paul, it's Eric. So I wouldn't say surprised. Certainly, we been engaged with Express Scripts and with other payers, and we've been carefully looking at opportunities as they've come along as whether it makes sense or not to contract for formulary status.

And we've said all along that patient access is very important to us, and we want to make sure that patients getting a prescription for INGREZZA are able to get access to INGREZZA.

And so with regards to Express Scripts, they have a little bit of a different kind of formulary product in that they have a product called the National Preferred Formulary that actually excludes products versus other types of health plan formularies that would stack up products either with equal access or with preferred access for one versus the other.

So I think that, there's a little bit of a different dynamic. Last week, when that announcement came up from Express Scripts, we communicated via an 8-K that it impacts less than 1% of our INGREZZA business. So it shouldn't be too surprising that we chose not to pursue that formulary in that regard.

But going forward, we're going to continue to make sure that we're evaluating each opportunity on a case-by-case basis. And where we think it makes sense, we'll go ahead and engage with the plans. So I think that, like I said in my prepared comments, we're very pleased with the overall coverage, with 90% of lives.

And what we found is that in the vast majority of these formularies, there's equal access to the therapies. We want to make sure that the providers and the patients have choice and that certainly what we've been pursuing with the plans..

All right. Thanks a lot..

Our next question will come from Tazeen Ahmad with Bank of America. Please go ahead..

Hi, good afternoon.

Can you hear me guys?.

Yes, we can Tazeen..

Okay. Thanks. So just wanted to ask a question about the continuation for INGREZZA. To the extent that you can quantify any trends that you've seen there in terms of how long are patients staying on drug and if they're dropping out, what the main reasons are. And then I have a follow-up..

Yes. Hi. It's Eric. So we haven't seen any shift or change over time in terms of persistency. And as we mentioned earlier, Q1 presented some unique challenge due to these payer dynamics with existing patients needing to be recertified by the plan or switching to another plan or having a reset for the out-of-pocket contribution.

And so as Kevin and Matt said, it impacted us primarily in the first half of the quarter. Functionally, what that led to is delays in getting prescriptions filled. And so even though we didn't see a change in persistency, what we did see is that some patients that sooner got a fill in January ended up getting a fill, for example, in February.

So there was fewer, on average, prescriptions filled per patient in Q1 as a result of these seasonal dynamics but no change in persistency..

Okay. And then Eric, just a follow-up with that. In terms of how payers initially respond to requests for patients to be put on INGREZZA, are you are aware of situations where payers might initially suggest AUSTEDO? And if they do suggest AUSTEDO, what percent rate are the doctors able to appeal that and get the patient on INGREZZA? Thanks..

Yes. So nationally, less than 10% of lives have formulary where one product or the other is preferred. So as I mentioned earlier, the vast majority of planned lives are equal access.

And in those situations where a plan prefers the deutetrabenazine product, we found that we've been very successful in encouraging our health care provider customers to appeal that decision because when they choose to prescribe INGREZZA for their patient, typically, there's a reason behind that.

And so if they're sharing the medical justification with the health plan for why they're requesting INGREZZA in the first place, we've actually seen a pretty high rate of successful appeal. And so overall, not being on formulary or being not preferred on the formulary hasn't been much of a barrier for us thus far through the launch..

To be clear, this is the first instance where you've had an exclusion, correct?.

Yes. But that exclusion doesn't go into affect until July. And so I interpreted your question to be in scenarios where formulary -- where we're not on formulary or where the other product is in a preferred status, which I mentioned earlier is less than 10% of the lives..

Okay. Thank you..

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

Yes. Hi, guys. Thanks for taking my questions. I'd like to ask a question on seasonality as it pertains to this year versus last year. So for the first quarter of 2018, there were 3,400 more prescriptions over the prior quarter, whereas this year, there's, I think, 1,300 prescriptions over Q4.

So I guess my question is what changed this year given you have more salespeople this year versus last year? You've got, I think, DTC campaign starting to roll out.

So just trying to understand the dynamics for 2019 over 2018?.

Yes. Biren, its Eric again. So as Kevin mentioned, this year, we have a much bigger patient base than what we had going from Q4 to Q1 2017 to 2018. And so I think, simply put, we saw a larger impact on refill prescriptions than what we had going into 2018. And the ratio of inner access to refill RXs back then was higher.

So as you have a higher base and you have a much larger patient pool that all of a sudden, they all need to get recertified, as Matt mentioned, that puts a tremendous strain on the pharmacies and on the providers to go through that process. So someone could be several months into their INGREZZA treatment. They could be doing fine otherwise.

And then all of a sudden, the plan notifies the provider, you need to start the process over again with this patient because it's a new plan here.

So I think that the impact was about at the level that we expected based on last year's experience, but it's just a larger patient base and certainly a lot more patients that needed to be recertified all at the same time..

Got it.

And then for my second question, can you provide the status of the Tourette's Phase 3 trial and when that trial would finish potentially?.

Thank you, Biren, it's Eiry here. We are still analyzing the data from the T-Force GOLD study that completed and that we read out the data at the end of last year. And we're learning a great deal from that study and from the data analysis. We have the T-Force PLATINUM study ongoing.

We continue to learn from that study, and we will be making a recommendation regarding the continuation of that study during the next quarter, the second quarter..

Great. Thank you..

Our next question will come from Ravi Mehrotra with Evercore ISI. Please go ahead..

Thank you for taking my question. Regarding the Voyager deal. So outside the PD and FA programs, you got two additional programs.

Can you just give us some color and granularity on where the targets of those programs come from and the potential timeline for news flow?.

Hi. This is Kyle. I could speak to that. Good question. On the discovery program, there's a process that we are currently working with Voyager now.

A lot of the things that we're discussing are diseases states that Neurocrine had a long-standing history, and we're sharing and discussing those options with our Voyager colleagues to ensure the programs that we ultimately will invest in make sense from a technological standpoint, from a gene therapy standpoint and then from a delivery standpoint.

So we're planning to get to a good passel later this year, and then we'll start up programs on that at that time point. I think we'll – we don't have a firm strategy on our disclosure of those programs, but Voyager will be consistent with what we've done with small molecules or we don't say a whole lot until those programs are in the clinic..

All right. Thank you..

Our next question will come from Phil Nadeau with Cowen and Co. Please go ahead..

Good afternoon. Thanks for taking my question. First, another one on seasonality. You had guided going into the quarter that there'd be $6 million to $8 million headwind from seasonality. And comments you made in the prepared remarks on $6 million to $8 million weren't entirely clear to me.

So are you saying that seasonality was less than $6 million to $8 million impact in total? Or was the impact of the gross-to-net adjustments less than $6 million to $8 million?.

Yeah. Hi, Phil. I understand your question. So as we think about seasonality, there are really two dynamics. One, that pertains to the demand side of the equation that we've talked about as it relates to requirements of reauthorizations and plan changes that slowed down the ultimate fulfillment rate.

The second piece is gross-to-net that you just inquired about. On the gross-to-net discount, we had previously guided that we had expected a headwind of $6 million to $8 million as it relates to – going from Q4 to Q1. And what we saw in Q1 was slightly less than the $6 million..

Got it. Okay.

And do you have a quantification for the impact of seasonality on demand as it relates to reauthorizations, plan changes, disruptions to prescriptions?.

Not that we're planning on providing..

Do you have an overall estimate for how much seasonality impacted revenue in the quarter?.

Phil, you probably – what I would say is let's get through the – this quarter and next quarter, and that's when we'll be able to allow us to then quantify that..

Okay. Fair enough. And then just on pricing and formularies. You did mention in your prepared remarks that there was a net price increase, which helped the revenue in the quarter.

As you begin to negotiate formulary negotiating against Teva, should we expect any impact of the discounting on net price? Or do you expect a relatively stable net price through the rest of 2019 and into 2020?.

Yeah. So from a net price perspective, when you move from Q1 to Q2, there'll be a bit of benefit on our net revenue for the script, because you have less of a headwind from the donut hole. So that will – the majority of that will come back as positive into Q1.

As it relates to, I guess, discounts or rebates that would impact our gross-to-net, nothing material that we would flag. But if that were to change at some point we would clearly communicate that, but at this time, really, the gross-to-net drivers will be surrounding the discounts associated with our current patient mix – payer mix..

Got it. Thanks for taking my questions..

Thanks, Phil..

Our next question will come from on Anupam Rama with JPMorgan. Please go ahead..

Hey, guys. Thanks so much for taking the question. Maybe just a quick one for me on the physician side, I'm wondering if you're seeing any trend -- different trends than you've seen previously on the repeat prescriber side.

And with the sales force expansion, any qualitative comments on how you're bringing new prescribers into the fold? Thanks so much..

Yes. So with regards to our prescriber base, obviously, one of the reasons that we did expansion was to be able to reach more high-potential prescribers. And I think that's one of the benefits that we're seeing now.

I mentioned earlier that we've seen a lift in terms of new patient starts, actually a record for Q1 versus any other quarter and the launch. So that's something that we're very positive about.

In terms of what it looks like at the prescriber level, obviously, we're still seeing new pace – new prescribers initiating treatment or initiating trial with INGREZZA for the first time each week in each month. So the pace of new prescriber adds does slow-down over time.

You know, we're coming up in a few weeks, we'll be -- actually, next week, we'll be two-years into our launch. And so that rate of adding new prescribers slows down, and what you focus on more is increasing your penetration of existing accounts. And really, that's been the primary focus for our sales team.

They work with not just the prescribers, but also the entire care team, especially in the psychiatric clinics, to help them to recognize TD, differentiate it from other drug-induced movement disorders and to more thoroughly screen patients and their practices that could be suffering from TD movements.

And so what we've seen is that with these efforts, we're able to go deeper into these existing prescribing accounts, help them to identify the many patients that are -- have been previously undiagnosed, and that's been the focus for us. So more focus on, I would say, continuing to grow the base from the existing prescribers.

And let us focus on trying to continue to expand because we've reached a large number of prescribers already..

Great. Thanks for taking my question..

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

Hi, Guys. Thanks for taking the question and congrats on dealing with the challenges of the first quarter well. Most of my questions have been asked, but I'm going to take another shot at trying to understand the Express Scripts decision and trying to understand really how that decision gets made.

Is that based on a perspective of clinical value or pricing? And if you could just add in there, what do you see as a relative pricing between an INGREZZA and AUSTEDO, if I may?.

So maybe I'll take your question in reverse order. It's difficult to get a handle on what the actual acquisition cost is of the deutetrabenazine product simply because the data are murky. We've mentioned before that you can't look at the prescription data and get a read on what are the actual prescribed dosing levels in TD versus HD, et cetera.

But with regards to the specifics around the Express Scripts decision, we mentioned in our 8-K that Express Scripts represents less than 1% of our existing business. And we don't expect this preferred formulary planned exclusion to have a meaningful impact going forward.

And so I think that, that provides a little bit of context in terms of our decision-making. However, we're always going to continue to reassess the landscape. We will make decisions when and where we think it makes sense to contract with the plan. We'll do so in the interest of patient access, and that's really our top priority..

And the only other thing that I would add there is that we have dialogue, and we continue our relationships with all the payers. It's not the fact that Express Scripts has put us on this exclusion list and now we're not talking with Express Scripts, but not by any stretch of the imagination. All of our relationships with payers are important to us.

So we continue with dialogue. And as Eric said, where we see that they may be movement then at the appropriate time if we think that's for the betterment of our patients, we'll look..

Okay. That's helpful added context, Kevin. The other question I had was on the pipeline, just take another shot at asking Eiry, if she would anticipate the VMAT2 inhibitor program to be in designated Phase II by the end of this year..

Charles, all I can really say is it's all working -- successfully draw a Phase I plan, and we're working to prepare for Phase II. And as soon as we have an indication closer to that, we'll obviously be communicating..

Okay. Thanks for taking the questions..

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

Hey, thanks for taking the questions. Just a follow-up on your next-gen VMAT2 inhibitor.

Can you just comment on what features you intend to improve upon versus valbenazine? Are they more efficacy related or safety and tolerability? And since you do have a lot of experience in Tourette [ph] clinical development and lessons learned there, is that a potential indication that you might pursue a Phase II? And then I had a follow-up..

Thanks very much. The -- with respect to the VMAT2 follow-on -- about valbenazine and INGREZZA, I think we're very confident in the profile of INGREZZA, and we are confident in the label that we have there in the context of TD. And that is a well-behaved medicine and serves many patients very well.

We do believe, however, that the VMAT2 target is a really important one, both in neurological disorders and in neuropsychiatric disorders, and that as a result, there's room for more than one potential medicine against that target. And that was a key driver for us in bringing forward the next generation.

And we will be moving that forward in our Phase 1 program as planned, and we're considering a broad swath of potential neuropsychiatric disorders, including potentially Tourette's, although, obviously, that's -- we have a broad range of things that we're considering right now.

But we definitely want to leverage the learnings from our Tourette's program in terms of what it's teaching us about the VMAT2 target..

Okay, great. Thank you for that.

And then just looking ahead to next week, is there any particular data we should be looking out for at AAN, either from Neurocrine or your competitors?.

Actually, we will have a press release upcoming very soon to highlight some of the data that we'll be releasing both at AAN and APA. Our press release will be coming out tomorrow. So if you look for that, that will give an indication of what we have ongoing across all of the -- both our molecules and the Voyager molecules..

Okay, great. Thank you..

Our next question will come from Paul Choi with Goldman Sachs. Please go ahead..

Good afternoon and thanks for taking our questions.

I was wondering, if you can maybe help us maybe understand prescription trends a little better? And specifically, with regard to what is the mix of patients getting 30-day, let's say, versus 90-day trends? And was it really the 30-day prescription-type patients who were impacted mostly in Q1? And do you think this would be refilled or re-upped, as you indicated, going here in the second quarter?.

Yes. Hi, Paul. So let me clarify. Because INGREZZA is a specialty medication, most plans impose quantity limits in terms of the number of pills dispensed per month. And so, there's very few plans that authorize 90-day fills, primarily because of the cost of the medication.

And so, the dynamic that we're really talking about is, a lot of plans have a requirement in place that, at the beginning of the calendar year, regardless of where that patient is in terms of their treatment journey, that they would require reauthorization. They could be three months into it, six months, nine months into the treatment.

So you have a dynamic where there's a whole bunch of patients requiring reauthorization to get their refill, and that could impact the timing of that fill in January. And so, sort of, a very typical example would be, where the reauthorization requirements in place, the provider is unaware of it.

And it's not until the pharmacy contacts the healthcare provider that says that his patient is unable to get their fill and tell the providers to submit the prior authorization paperwork all over again. And so they get the gears going, and that's where you would see a delay.

Someone that might have gotten a fill in January, for example, wouldn't get their fill until February. So that's really the dynamic that we're talking about. And then you kind of layer on some of these other payer-related issues. Matt mentioned that, beginning of the year is a reset for co-pay contributions.

That affects both Medicare patients as well as commercial patients. And so they've achieved their cap last year and didn't have any more out-of-pocket. And now all of a sudden, they're starting over on that again. That can also affect the timing of fills, both for new fills and for refills. So it's not so much a 30-day fill versus 90-day fill.

It's more of just -- because of the way that our healthcare system is set up, you have all of this activity really happening at the beginning of the calendar year, and then it diminishes as you go forward..

Got you.

Just, have you ever -- or with regard to your clinical support in terms of like tracking patients and so forth, do you do -- are you thinking about investing more like in in-patient follow-ups, just making sure, like, nurses calling and so forth, with regard to making sure the scripts are filled, apart from sort of the paperwork obstacles that you just talked about?.

Yes. Actually, we had a program when we first launched that involved follow-up calls from nurses at our patient services hub IMBRACE.

And what we found is that the pharmacies in our specialty pharmacy network, our limited pharmacy network, were actually really successful in terms of their follow-up activity and were better suited for that kind of activity than we were.

And so, even with the efforts of the pharmacies knowing that patients were going to be having recertification requirements come January, they were, for the most part, very proactive in contacting people at the end of last year. Despite all that, you still have this, I'll call it, surge of recertification that hits January.

And they need to call people. Sometimes they have to call them multiple times to reach them, et cetera. So it does put a stress and a strain on both the pharmacy network as well as on the healthcare providers, because they have to start over again in terms of the paperwork to get that patient restarted on medication..

Got you. And then, just maybe one quick one for Eiry. With regard to the updated data that you're talking about at AAN -- at the upcoming AAN and APA meetings.

I guess, in terms of primary clinical message that you're looking for from the data, can you maybe highlight what you think clinicians should take away and how you think that might potentially translate to either pickup in uptake or general clinician awareness?.

I think two things I'll direct you to. First, we continue to release ongoing longer-term follow-up data from our Phase 3 trials, which show the sustained effectiveness and improvement in tardive dyskinesia symptoms in patients who take INGREZZA together with recombinant medications for their psychiatric disorders.

And secondly, I think the data from our RE-KINECT trial, which are focused on understanding the quality of life, as we know that part of dyskinesia as a condition has a significant effect on the functioning of patients on a day-to-day basis and also on the lives of their caregivers.

And so, we continue to be very interested by the data coming out of our real-world study, RE-KINECT..

Great. Thanks for taking our questions..

Now, our next question will come from David Amsellem with Piper Jaffray. Please go ahead. David, your line is open. We will take our next question from Marc Goodman with SVB Leerink. Please go ahead..

Yes. Hi. Good afternoon. So two things. One, I'm just curious on INGREZZA. Can you just talk about the prescriptions per patient, and how that's changed? Just -- I know you're talking about another factor there before. But I'm just curious, if the patients are actually still getting the same amount of prescriptions that the patients who run it last year.

You have two years of data now, so curious there. And second, Eiry, you're talking about the Tourette's. What area are you focused on for your analysis? I mean it almost sounds like you kind of found something that's interesting.

Just curious, we kind of all just assumed that the program was going to be shut down, and it seems like it's taking longer to make that decision. So, maybe we should view that as a positive..

So, I'll take the first part of your question. This is Eric. With regards to prescriptions per patient, we looked at that very carefully. Over time, patients that started early in the course of the launch, patients that started last year or even more recently, we've seen that it's been pretty consistent.

There hasn't been any change in terms of that persistency over time, both in the number of months that you can expect the patients to be on treatment and the number of fills. What we did notice, though, and I think I highlighted this in my comments, is that in Q1, the average number of fills per patient was a little bit lower than what we saw in Q4.

This is primarily due to these payer dynamics that cause delay in getting filled, especially in the first half of the quarter. And so, even a modest change in the number of fills per patient can have a meaningful impact on the business.

Thankfully, this was counteracted by a record number of new patient’s hearts, and this gives us confidence in the underlying demand.

Eiry, you want to handle the second?.

Actually, I'll take the second question, Marc, just because I don't want there to be any interpretation out there that there's some rebirth taking place here with the Tourette's based on the fact that we're being very careful in going through the existing database that we have from the Phase 3 study, and then the ongoing T-Force PLATINUM study.

I think, as Eiry said, it was a very large clinical trial. There is a wealth of data there. We have a keen interest and a key concern for children who suffer from Tourette's. And so we want to make sure that as we go through all of that data, that with these kids, who some of them have very complicated other treatments that are taking place.

They have a number of different disorders in addition to Tourette's that is taking place, we want to -- even in studies that don't give you the outcome that you want, you still want to be able to generate as much data as you can for the future publication to help move the field along. And so that's what we're doing throughout this.

We're not -- we don't feel like, we're in any hurry that we have to make these decisions. But – so, we're making them carefully. And so Eiry and her team, along with all of our external experts, have been involved in this process. And we'll able to update you on this later in the quarter..

Thanks..

Our next question will come from Alan Carr with Needham and Co. Please go ahead..

Hi. Thanks for taking my questions. I may have missed this, but if can you all comment on guidance in terms of OpEx and sales? I know you've given sales guidance in the past. But I'm wondering, if there's any updated thoughts on philosophy around that. And then also sort of fitting into this is your DTC campaign.

Is that something -- what sort of duration do you have in mind? And might that front-load SG&A spend this year?.

Yeah. Hi. Hi, Alan, this is Matt. As it relates to the guidance, at the beginning of the year, we provided guidance that was for SG&A and R&D expenses between $550 million to $600 million. And that would be inclusive of ongoing Voyager-related expenses that would range between $40 million and $50 million.

So at this point in the year, we're not providing any operating expense guidance updates. The decision around T-Force PLATINUM will be an interesting finding for us as well as -- as the teams continue to work with Voyager on the development programs.

So, no update to operating expense guidance at this time, but something if we are going to update guidance, it will likely be next quarter or the quarter after. As it relates to revenue guidance as a company, as you know, we took the position not to provide a formal revenue guide.

And if we ever did migrate to providing a revenue guidance, it likely would not be a form of a quarterly guidance. So we are going to continue to stay close to the INGREZZA launch, and continue to learn the insights as to the business driver of long-term compliance, how exactly seasonality plays out as well as sales force expansion, et cetera.

And we'll continue to have that on the radar to consider whether and when we will provide guidance..

And then around the direct-to-consumer spending there, any commentary around that, whether -- how long that campaign might last?.

Yes. So Alan, this is Eric. Typically, it takes time, for B2B campaigns to have an impact for two reasons. One, you have to run the ad with enough frequency and the right targeting. Two, reach your viewer multiple times to get them to take interaction you're looking for.

In this case, we are encouraging them to recognize the TD symptoms that they may be experiencing to go to our website, our registered optic into our database and to talk to their physician. And the specifics around our program, we just launched it in January. And so we're less than a quarter into it.

The expectation is that it's going to take some time for this to build for us to achieve the kinds of GRP that we’re looking for in terms of exposure to the audience. And then we're going to reevaluate the program over the course of the year to determine if there's any adjustment that we need to make.

However, I mentioned earlier that we're really pleased with the way that the campaign is performing thus far in terms of the number of unique visitors coming to talk about td.com, the time they're spending on the website, the materials that they are downloading and also the number of individuals that are opting into our database to receive more information about TD..

Thanks for taking my questions..

And we will take a follow-up question from David Amsellem with Piper Jaffray. Please go ahead..

Thanks. Sorry, my phone had cut out. So just wanted to make sure I got the question in. Thanks for accommodating me. So first, again on the contracting landscape beyond this year, I'm wondering if you could talk to that.

And I guess the question here is does the ESI news recently is kind of a harbinger more payor battles become particularly as a footprint of INGREZZA grows? And then secondly, can you just remind us, how you're thinking about the CAH program, the adult program in Phase III specifically the clinical outcome measures that you think the FDA may want either as part of the primary outcome measure or secondary analyses? Thanks again..

So this is Eric again. With regard to the peer landscape, the one thing that we can just say for sure is that it's going to evolve. Certainly, this is a market that is growing. We're the market leader. We've been pleased with the reimbursement that we've been able to achieve thus far.

Over 90% of lives are covered for INGREZZA, and that's regardless of formulary status. And we've also found a very high rate of reimbursement. 70% to 80% of written prescriptions have been filled. So these are things that we're very proud of.

And certainly, I think it's a testament to our sales team, to our market access team and to the other customer-facing roles. We're going to continue to evaluate opportunities going forward with plans. And where we think that it makes sense to contract with the plan, we'll do so with patient access being a primary driver for that.

And with regard to the specifics of ESI, certainly, we recognize that, that's an important PPM and certainly has a magnified impact on other brands. However for us, it represents less than 1% of our business today. And certainly over time, we're going to monitor opportunities with Express Scripts.

And as Kevin said, we'll continue to engage in dialogue with ESI and other payers because these are long-term relationships, and we're in it for the long haul..

Thanks, David. With respect to the CAH question, we were very encouraged by the interim data that we released recently from a Phase II ongoing study in adults treated for 14 days without medication.

We saw, just as a reminder, at least a 50% reduction in baseline for the 17-hydroxyprogesterone and ACTH levels in greater than 50% of the subjects treated in that trial. We also saw a meaningful changes in androstenedione as biomarkers.

That's important because those biomarkers fundamental are to the ongoing treatment and long-term treatment and management of treatment for patients with CAH. And as such, they will form the foundation of our registration program and the design of that program and the interactions that we plan to have with the FDA coming out later this year.

Obviously, other endpoints will be important for us to listen to the FDA around. We know that these patients take a long-term, high-dose steroid treatment. That's the only treatment available to them in reality now. And so any potential impact, the steroid dosage needed in patients may be interesting both to us and to the regulators.

But as I said, we will be interacting with the FDA around the potential endpoints for registration program in adults. In addition, we intend to start a proof-of-concept study in pediatric subjects later in the third quarter..

Thank you..

Our next question will come from Sumant Kulkarni with Canaccord..

Good afternoon. Thanks for taking my questions. I'll ask both upfront.

So now that the transaction with Voyager has closed and we also have early data from your key competitor in gene therapy in Parkinson's, how do you characterize the differentiation of VY-AADC versus the Axovant Lenti program? And second, what's the latest status on the solute carrier family of transporter products? And any definition around what CNS indications those might target?.

Yes. I'll start. This is Kyle. I can start with your last question there, and then we can move on with the Voyager one. Regarding the cellulite carrier protein collaboration that we have with Jnana, that's still a very early-stage collaboration that we have going on a number of targets that were of interest in Neurocrine long-standing.

We haven't disclosed what those targets are, but as we select advanced leads and those move into development candidate selection and then into the clinic, that we would be able to share more about those programs and not necessarily trying to keep those close, but we have had a long history in working in targets in the CNS.

And many things fail, especially in early stage. And so until those become real and are in clinical development, we don't say much about those.

But about the collaboration will we provide, happy with the way things have gone thus far, and we'll continue working with our genetic colleagues to identify new leads on the targets that we have selected to work on with them. Now when it comes to Voyager, I'll have Eiry speak to that question..

Yes. So Sumant, thank you. We are very confident in the targets that we're working on with the Voyager collaboration in TD. We think it makes a great deal of sense to be targeting the AADC enzyme given the key role in the pharmacology and the metabolism of levodopa and dopamine in the brain.

We also think the program is very well designed in the context of being able to understand the coverage that you're getting on the gene therapy approach, how that translates into increased activity of the enzyme as measured by pet and being able to correlate that clearly with clinical potential benefits for patients.

It's not as clear that, that -- and this impact on understanding of dose response is easy to do for other approaches in this field. And so, we remain very confident with the approach that we are collaborating on with Voyager..

And just to add to that. I think your question was respect to Axovant there, using a Lenti virus delivery for three different genes. I think no one here knows what ratio of those three genes should be used for an effective treatment for Parkinson's, let alone what their long term consequences would be.

I'm putting these three genes in an area of the brain, where they're not naturally found and also within the human genome at different places that you're unable to control.

I think the elegant piece about of the approach that Voyager has bought forth is that for the single gene that we're adding into the pertain and we're looking at doing here is not having it integrate within the human genome which is a positive for some adultery consequences, if you put the gene in the wrong part of the human genome.

But more importantly or equally important on the dosing piece, if you happen to provide too much of the gene, the safety belt here is levodopa, you can reduce your levodopa dose over time in patients and get the desired effect, put the Lenti-virus approach if you overdose or you put the gene in the incorrect spot, there's not much you can do for the patient at that point..

Got it. Thanks..

And there are no further questions at this time. So, I'll turn back to Kevin Gorman for closing remarks..

Thank you very much. We enjoyed your questions. And what I'd like to close with is to reiterate something that Eric has said. I'm very proud of our commercial team, both the field teams and the in-house teams here in the way that they managed through the first half of Q1. They really have teed up INGREZZA for a very nice year ahead of us.

There is -- we have all the confidence in the world on how well INGREZZA is going to perform and the number of patients that we're going to be treating with INGREZZA, not just through the remainder of this year, but from years to come.

And it goes back to something that I've said on these calls each and every time and from the podium and different banking conferences and in one-on-one meetings is that you can get misled by looking at INGREZZA on a quarter-to-quarter basis.

What you really need to do is you need to step back and look at INGREZZA and look at the trends that we established on a year-over-year basis. And that's what I would encourage you to do going forward. And then finally, May is Mental Health Month.

And we're very happy that as part of Mental Health Month, we have made designated Tardive Dyskinesia Awareness Week. We're going to be sharing more news on this next week and we're also going to have a large presence at both AAN and APA in the very near future.

I'm very happy with what we shared with you today about our growing pipeline, advancing pipeline, and that's going to be a common theme in our quarterly calls to come throughout this year. So, I thank you very much once again for your attention and look forward to meeting you at future meetings. Take care..

This does conclude today's program. Thank you for your participation. You may now disconnect..