Hello, and thank you for joining the Neurocrine Biosciences Reports Second Quarter 2019 Results Call. [Operator Instructions]. It is now my pleasure to turn today's conference over to Kevin Gorman, CEO. Please go ahead..

Thank you very much, and thank you, everyone, for taking the time to join us on our Q2 earnings call. On this call, I'm joined by Kyle Gano, our Chief Strategy and Business Development Officer; Eiry Roberts, our Chief Medical Officer; Matt Abernethy, Chief Financial Officer; and Eric Benevich, Chief Commercial Officer.

Now during this call, we will all be making forward-looking statements. So Jane, could 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 or implied by the forward-looking statements is contained in the company's SEC filings, including, but not limited to, the company's second 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. I trust everyone has got a chance to at least briefly look over the press release that we made available just prior to this call. I am more than pleased with the efforts of our commercial and medical teams here at Neurocrine.

They've continued their educational efforts with health care professionals, patients and their family members on increasing the ability to recognize and diagnose TD and clearly the value of treating this important disorder. As you can see, we had a very good quarter in sales.

As we said after Q1, the second half of that quarter set us up nicely for this quarter and for the rest of the year. Now Matt and Eric are going to be addressing this quarter in more detail in just a bit and through your questions, which we'll get to.

We expect that the trends that we have seen in the first two years of our launch will persist, that is increased uptake of INGREZZA quarter-over-quarter and year-over-year, but as always, as we've stressed there's seasonality, with Q2 and Q4 being stronger quarters and Q1 and Q3 being relatively slower quarters, but nevertheless, growth quarter-to-quarter.

Now in additional to INGREZZA, which we will go into detail on, the quarter -- since our last conversation, we have seen very good progress with the rest of our business. We submitted and the FDA accepted the filing for opicapone. We have started the pediatrics, CAH Phase II study, as with our adult study.

This is an adaptive design, and we have been preparing for discussions with FDA on both our adult CAH program and our collaborative AADC program with Voyager. So each aspect of the business is moving forward quite nicely and to plan.

So what I'd like to do is I'd like to get over to Matt and to Eiry for some prepared remarks so that we have plenty of time for your questions. So Matt, I'll turn it over to you..

Thank you, Kevin. Good afternoon, and thank you for joining our second quarter 2019 earnings conference call. To begin, I'd like to acknowledge the team for completing our NDA submission for opicapone, positioning us to possibly have reapproved medicine by this time next year.

In addition, our commercial team did an excellent job delivering a strong second quarter for INGREZZA. During the second quarter of 2019, INGREZZA prescription volume increased to approximately 31,600 scripts, resulting in $180.5 million in net product sales.

This compares a 16,700 scripts, $96.9 million in net product sales for the second quarter of 2018. For the first half of 2019, INGREZZA net product sales were $317 million compared to $168 million for the first half of 2018 with over 80% year-over-year growth.

During the second quarter, our strong sequential 7,400 TRx increase was primarily driven by a record number of new patient addition and improved refill rates as compared to the seasonally slower first quarter.

These results reflect the success of our expanded commercial organization, the patient-focused Talk About TD disease state awareness campaign and continued health care provider educational initiative.

In addition, channeled inventory increased during the quarter leading to a slight increase in days on hand inventory resulting in $4 million benefit in Q2, which would equate to approximately 600 TRx.

During the second quarter of 2019, net revenue per script increased from $5,600 in Q1 2019 to $5,700 in Q2 2019, primarily as a result of the lower impact due to the Medicare Part D donut hole. Moving now to our financial results for the second quarter of 2019.

During the quarter, we've recognized the profit of $51.3 million or $0.54 diluted earnings per share. Our net income includes a noncash gain of $21 million, associated with the appreciation of the Voyager Therapeutics' equity investment.

Our R&D and SG&A operating expenses, excluding the Voyager IPR&D were $142.5 million during the second quarter of 2019. The increase in R&D as compared to Q1 2019 reflects a $10 million milestone to BIAL related to the FDA's acceptance of the opicapone NDA filing and full quarter impacts on the ongoing expenses related to the Voyager collaboration.

Regarding cash and investments, we ended the second quarter with $766 million in cash and investments, reflecting a $66 million increase from last quarter. As you saw in our earnings release, we are updating our SG&A and R&D expense guidance range for 2019. We expect this SG&A, R&D and IPR&D expenses to be $658 million to $688 million.

Ongoing SG&A and R&D, excluding IPR&D, are expected to be $540 million to $570 million, which compares to our previous guidance range of $550 million to $600 million. Our updated expense guidance range reflects that a decision to discontinue the T-Force PLATINUM study slightly offset by standard investment in INGREZZA.

I'd like to take a moment to provide a few comments about our revenue outlook for the second half of 2019. Upon FDA acceptance of AbbVie's anticipated elagolix, NDA submission for Uterine fibroids, we will recognize revenue for a $20 million event-based milestone as part of our collaboration agreement with AbbVie.

As it relates to INGREZZA, with two years of commercial experience now in hand, we do believe that as a specialty tier neuropsychiatric drug, INGREZZA does experience a level of seasonality during the year. We believe this seasonality awaits the slower sequential growth quarters in Q1 and Q3 with faster sequential growth quarters in Q2 and Q4.

For the third quarter, we do expect continued incremental new patient demand and an increase in overall prescription volume, but anticipated growth to be tempered by seasonal dynamics impacting TRx for patient and potential channel inventory softening.

Overall, we remain very encouraged by the progress that our team continues to make with health care providers and patients. And with that, I will now hand the call over to our Chief Medical Officer, Eiry Roberts..

Thank you, Matt, and good afternoon to everyone on the call. I'm happy to provide an update on our clinical efforts this quarter for tardive dyskinesia, Parkinson's disease, congenital adrenal hyperplasia and our Phase I program.

Educating health care professionals and key stakeholders about tardive dyskinesia and its impact on peoples' lives is a key focus for the medical group here at Neurocrine Biosciences.

As part of this effort, in Q2, we were pleased to share additional quality of life data from the ongoing RE-KINECT study, the largest real-world screening study of patients with clinician-confirmed possible tardive dyskinesia.

These data supports that involuntary movements have a significant negative impact on the patient's health-related quality of life with nearly 30% of patients reporting moderate to extreme difficulty performing usual activities in their family, work and social life.

Also almost half of patients in the RE-KINECT study experienced moderate to extreme symptoms of anxiety or depression in association with their normal involuntary movements.

It was noteworthy in this study that while patients were very consistent in evaluating both the severity and impact of their involuntary movements, clinician assessments tended to be less severe and not well correlated with those of the patients.

This would speak to the potential value of, including more patient-related assessments in the diagnosis and management of TD in the doctor's office.

I would also like to highlight that during Mental Health Month, we were proud to work with advocacy partners, legislators and governors across 28 states in order to declare the first full week of May as Tardive Dyskinesia Awareness Week.

These assets placed a spotlight on this important movement disorder and the debilitating effects that it can have on the physical, social and emotional well-being of patients.

Moving forward, TD Awareness Week will continue to be an important step towards broadening awareness of this often isolating condition in support of patients living with tardive dyskinesia.

In April, we submitted the new drug application or NDA for opicapone, a novel once-a-day COMT inhibitor for the treatment of motor fluctuations in patients with Parkinson's disease.

We received FDA acceptance of the NDA earlier this month and the FDA has set a standard 12-month review process for opicapone with the Prescription Drug User Fee Act, or PDUFA, target action date of April 26, 2020.

The submission of this NDA was a huge amount of work for the teams at Neurocrine and BIAL, given the robust database that exist for opicapone. The NDA contained 38 clinical studies and includes an extensive assessment of efficacy and tolerability generated predominantly from two large Phase III studies BIPARK-I and BIPARK-II.

More than 1,000 subjects with motor fluctuations due to Parkinson's disease were included in the clinical development program for this medicine. I would like to thank our staff across the two companies for their collaboration and hard work on the program to date.

I am proud of the quality of the dossier that we submitted to the FDA and we look forward to continuing to work with the agency to bring this new treatment option to patients in the U.S. coping with this debilitating disorder. Turning now to our congenital adrenal hypoplasia program in adults and pediatric patients.

The adaptive Phase II proof-of-concept study examining the pharmacokinetics, pharmacodynamics and tolerability of NBI-74788 in adult patients with congenital adrenal hyperplasia continues to progress well.

We are currently using the positive initial data generated from this study to support discussions with the FDA around the design of our NDA-enabling studies for adult patients with congenital adrenal hyperplasia.

We also advanced our -- the program in pediatric patients with the initiation of a Phase II proof-of-concept study that is also adaptive in nature and will examine the pharmacokinetics, pharmacodynamics and tolerability of NBI-74788 administered for 14 days. Initial subjects enrolled in this study will be 14 to 17 years of age.

Later this year, after our first several 14 to 17 -year-olds have been treated, we will adapt the study to include younger subjects.

Throughout Q2, we continued to work closely with our colleagues at Voyager to progress the Phase II VY-AADC gene therapy program for the treatment of motor fluctuations in Parkinson's disease and to bring forward subsequent programs, including a program targeting Friedreich's ataxia. I'd like to now give an update on our Phase I program.

We continue to progress the Phase I clinical program for our internally discovered vesicular monoamine transporter-2, VMAT2, inhibitor with potential use in the treatment of a range of neuroscience disorders. We will provide further updates as this molecule moves forward in the clinic.

In Q2, we also made the decision to discontinue the development of a novel molecule to address neurological diseases. This molecule was the first in a series under evaluation in our research lab against this target.

While the lead molecule was well tolerated in healthy participants in the initial Phase I studies, it's pharmacokinetic profile was less than favorable. And therefore, we plan to advance a backup compound into the clinic in the near future to address this novel target for neurological diseases.

I am very pleased by the progress made this quarter across our clinical development efforts. I will now hand the call back to Kevin for closing remarks..

Thank you, very much, Eiry and Matt. So in order to get your questions, let's start taking them now.

Operator, if you could queue everyone up now, please?.

[Operator Instructions]. And we will take our first question from Brian Skorney with Baird..

Great quarter. So we saw really a big step up in terms of the number of TRx this quarter or as you mentioned the 7,400 increase over the last quarter.

Now you've spoken about the reauthorization seasonality impacting first quarter in -- sort of in qualitative terms before, but as we think of the increase, can you kind of give us any color on what portion of the 7,400 is related to the reauthorization headwind versus kind of the underlying demand from new patients? And if we kind of look at the average increase over the launch, it's somewhere in the 3,500 to 4,000 range.

Do you think that's what we're seeing here with the 1Q seasonality providing most of the increase over this base number? Or is this kind of like a normal from the sales force expansion that we should be thinking of now?.

So Brian, this is Matt. Good to hear from you. So as you reflect on what we talked about in our last quarter call, we had acknowledged that we had a slowdown in overall TRx per patient as a result of the payer-related seasonal dynamics that did impact other rates of refill.

But importantly, what we saw in the first quarter is our team work through those headwinds that got -- that put in place at the beginning of the quarter and how we exited. We saw a good trajectory from an existing patient perspective.

We did not see a change in discontinuation rate, but importantly, we also saw a record number of new patients in the first quarter. So those factors -- those factors combined definitely provided a lift to us in the second quarter.

But I would say that as we've said, we know that there's going to be ebbs and flows throughout this quarter or throughout our launch based upon different seasonal dynamics. And the most important metric that we looked at within this quarter is another record of new patient additions that really positions us well now and going forward.

Eric, anything to add?.

Yes. And just to piggyback on what Matt said, I do think that we're starting to see the benefit of our expanded field sales team as well as some of the other initiatives that we implemented last year and in the first half of this year, including our Talk About TD unbranded disease awareness initiative.

So it's really, I think, a cumulative effect of our total promotional effort and we see the benefit of that more so than just sort of a lower jumping-off point from Q1..

Great.

And then, may If I could just ask a quick follow-up on COGS, are we still seeing previously expensed product being sold? Or are we looking at what the real gross margins on INGREZZA are here?.

I think this is a good representation of what our gross margins are on INGREZZA, Brian..

Our next question comes from Tazeen Ahmad with Bank of America..

Maybe Matt, just to continue about the quarter, I think on the 1Q call, you have provided some color saying that 70% to 80% of scrips that have been written have been able to be dispensed thus far.

Can you comment on whether or not that trend has stayed stable? Or if at all it has changed? Secondly, can you talk about persistence rates as it relates to, I would say, last quarter or maybe even since launch? And then, lastly, you talked about $4 million impact coming from an inventory build in the quarter, would you expect any kind of stocking impact as well in the third quarter?.

Yes. Tazeen, thanks for the question. Eric will talk through what we saw from a persistency perspective as well as what we saw from a distribution access, and then I'll close off with the comments on the inventory build that we saw in the quarter..

Yes. So the short answer is that we didn't see any meaningful dropoff or change in terms of patients being persistent over the course of Q2 versus Q1. So that's been very steady.

And also in terms of the -- what I call the fill rate, meaning the percent of written scripts that are ultimately filled, and it still remains very high above 70% looking across the three payer segments.

And so we feel really good about the coverage that we've had with INGREZZA from a payer perspective and the proportion of patients that are able to get on medication.

Matt, do you want to handle the last part?.

Yes. So as it relates to channel inventory, as you know, from a revenue recognition perspective, we recognized revenue on a sell-in basis, which is basically what we shift to our distribution network. And in the quarter, we did see a slight increase in our overall days on hand, there's different dynamics that can cause that.

But overall, we're still under two weeks of channel inventory, but did see a slight increase that we felt important to call out so that you could get a representation of what our underlying performance was in jumping-off point. That could be caused due to the 4th of July week coming right after the end of the quarter.

It could have caused a little bit of increased stocking within some of our channel to deal with those dynamics. But overall, wanted to flag that to you as if that occurs, make sure you got a clean read on the quarter, but then also as you think through setting expectations for the third quarter..

Our next question will come from Paul Matteis with Stifel..

Let me add my congrats on the quarter. I wanted to try to get at one more time the seasonality component.

And Matt, I was wondering if you'd be willing to speak to fluctuations you saw this quarter and last quarter? And your expectation going forward for average script per patient? And within that, are you seeing pretty consistent underlying patient growth and is really just kind of a script and timing of refills that's driving most of the year around seasonality? And then secondarily, Eiry, I was wondering if you just speak to CAH and ahead of FDA meeting, what you're proposing for a potential registrational path? Is it a steroid sparing endpoint? Or is it something else?.

Yes, thanks, Paul. I don't know we understand the question around seasonality and the dynamics and what I would say is what seasonality does for the INGREZZA business is, really have a more pronounced impact on our existing patient population and what the overall rate of refill is within each quarter.

As we mentioned last quarter, Q1 would be our lowest rate. Q2 steps back up to what we would deem a more normal rate. Q3 soften a bit from a refill rate perspective for dynamics that may be tied to vacations and/or patients being more transient. And then in Q4, we see a step back up in the overall refill or TRx per patient.

So that's how we look at the cadence. As our patient poor growth, these seasonal dynamics caused a bit more volatility in overall sequential TRx performance as you saw both in Q1 and then in Q2.

If we were a more mature product, you would likely to look at our year-on-year metrics, but obviously, we're still two years and -- only two years into the launch for significant year-on-year growth, that's harder to tease out, but that's how we see seasonality. There is some dynamic on new patients.

Some of that is basically how a new patient is distributed within a quarter. We do see seasonality there, but I would call out the more meaningful impact being on existing patients in their overall refill rates per quarter..

Thanks, Paul. On the CAH question, we continue to be very encouraged by the data that we're seeing from the ongoing adult POC study that we released, we see a very meaningful reduction in ACTH 17-hydroxyprogesterone and androgen levels from the initial data from that study.

We submitted those data with our package to the agency and we're looking forward to the dialogue with them this quarter around the plans for the next steps in development. Our position on end points and design of the registration program really remained unchanged.

We believe the steroid hormone levels are critical to the management of patients in an ongoing fashion with this disorder.

We also believe strongly that the CRF1 antagonist approach could allow us to have a significant impact on those steroid hormones owners without the need for super physiological glucocorticoids and we look forward to engaging with the FDA around that.

As we finalize our plans moving forward and, obviously, as we start the next phase of clinical development, the study will be articulated on clinicaltrials.gov..

Our next question will come from Biren Amin with Jefferies..

Can you just maybe talk about script prescriber? How much of the NRx growth was driven by new prescribers versus prior prescribers?.

Biren, it's Eric. So the way I would describe it is that we're starting to see a greater proportion of NRXs and TRXs driven by repeat prescribers. And as Matt mentioned earlier, we are little over two years in for a launch now.

Certainly, a big focus of the sales force expansion was to be able to go a little deeper with existing customers as well as to be able to access individuals that we hadn't been able to reach previously. But overall I think the trend is that we're seeing more and more of our business coming from our existing prescribing base..

Got it.

And then I guess, just a follow-up question on the para-dynamics and given the Express Scripts decision earlier this year, have you had -- have you conducted any payer outreach? And has there been any sentiment changes on expectations for a rebate?.

Yes. So let me start off by saying that patient access is one of the highest priorities that we have. And what we found thus far in this market is a little bit unusual that being on or off formulary doesn't really have -- hasn't had a meaningful impact on the likelihood of securing reimbursement for a particular patient's claim.

Our goal is to have open access meaning that we want to leave the choice in the hands of the patients and their providers to choose the right drug for them.

And so when we choose to contract for the plan, we are not trying to secure exclusive position on a formulary and we think it's best to allow that the patient and the provider, they have therapeutic options. So in terms of what the dynamics have been, certainly, we weren't contacting early in our launch.

More recently, we started to engage selectively with payers. And when we do that, we do it with the understanding that we're making an investment in patient access and we're doing it on a selective basis where we think the patient's going to benefit.

Overall, we haven't seen any significant shifts in terms of payer dynamics, in terms of likelihood of scripts getting approved by the plan. And certainly, we are going to continue to monitor the payer situation very carefully.

But like I've mentioned earlier, we're very pleased with the access that we have for our patients with over 70% of written prescriptions getting filled, patients being able to afford INGREZZA with the majority paying less than $10 per month and over 90% of patients being covered for INGREZZA.

So it's a very favorable position to be in and we want to maintain it..

Our next question will come from Phil Nadeau with Cowen..

Congratulations on the quarter. Just a couple of follow-up questions. First on the insurance coverage with proposed changes to health care. In Washington, people are trying to figure our Part D exposure.

Have you ever disclosed or would you be willing to disclose either INGREZZA's Part D exposure? Or if you've done any analysis on what the proposed finance change could impact revenue? Would be curious....

Phil, no, we haven't disclosed what our payer mix is nor exposure to Part D. As far as the discussion was going around on health care reform, that's important. And it's obviously an important debate about affordability, access and long-term sustainability for the industry.

We're staying very close to those discussions and negotiations, not only through the trade associations, bio and pharma, but also through our internal and our external government relations team at Neurocrine. So we like you remain very interested in this. We'll add our voice at the appropriate time through -- in the appropriate way..

Got it. I mean just 1 follow-up question Matt. I think during some of your remarks, you mentioned that Q2 was the highest new patient start number that Neurocrine has seen.

I just want to confirm that I heard that correctly and you aren't referring to your prior comments on how Q1 ended?.

Yes. Q1 was our old record, and Q2 is now another record. And as Eric mentioned, really a cumulative effect of the expanded commercial organization, he talked about TD disease state awareness campaign and all the educational initiatives. We know we're going to have seasonal dynamics either headwinds or tailwinds.

And the number one focus of this launch continues to be aiding in the diagnosis of patients struggling with tardive dyskinesia and then, ultimately, getting them on INGREZZA and getting them help. So we're quite pleased with our progress and the efforts of our team.

They've done an incredible job to help a lot of patients, and Q2 was once again another record quarter for us..

Our next question will come from Anupam Rama with JP Morgan..

Congrats on the quarter. Maybe just a quick one on opicapone.

With the PDUFA now set, can you just remind us how your sales infrastructure might change upon approval? And what type of pre-commercial activities are ongoing for opicapone?.

Anupam, it's Eric. I think the short answer is that we're prepared from a commercial and infrastructure perspective. When we did our expansion in Q4 of last year, it was really to accomplish two goals.

One was to optimize our sales team for the tardive dyskinesia opportunity with INGREZZA, and secondly, to make sure that we had adequate reach into neurology to prepare for the eventual launch of opicapone in Parkinson's disease. So we're well prepared in terms of our sales force structure and our overall commercial setup.

And then, in terms of really preparing the market, so to speak, for opicapone, we're going to be launching a unbranded campaign later this year to really start to remind prescribers about COMT inhibitors and the role of the COMT enzyme in terms of patients that are diagnosed with Parkinson's disease and being treated with levodopa and carbidopa.

And so certainly, we think there's an opportunity to elevate the importance of COMT prior to the approval and launch of opicapone, and so far at least in the early work that we've done, that campaign and that educational contents have been very well-received with our consultants in the neurology community.

So we're looking forward to really get out later in the year..

I would just build on that as well by saying that we have mobilized our Medical Affairs Organization, including our MSL group to be working with key opinion leaders and as the neurologists in the field to ensure that we are educating around the already published data on opicapone.

We've also been preparing our own publications and starting to release that on the medicine in preparation.

I mean obviously, this is an area where there is still significant unmet need for patients with Parkinson's disease and motor fluctuations, and we're really hopeful that opicapone will provide a very useful additional opportunity for treatment in this space for patients.

And just to remind you of some of the reasons we're really looking forward to that is, obviously, this is a simple once-a-day treatment, which has been very well tolerated and demonstrated significant impact on-time without troublesome dyskinesia in patients with motor fluctuation.

Also it doesn't suffer from some of the challenges of previous COMT inhibition, including a better profile from the perspective of GI tolerability and not causing discoloration of body fluids that is seen with other COMT inhibitors.

And so we're very excited about the opportunity and we're making sure that we have our own Medical Affairs staff and the external community ready for this mentally..

Our next question will come from Jay Olson with Oppenheimer..

Congrats on the quarter.

Now that you've put together two consecutive quarters of record new patient starts, is that a sustainable trend? Or is that something that could be subject to the seasonality headwinds that you mentioned in 3Q?.

Yes. I think as I mentioned and as we've said in previous quarters, when you're developing a market like this that there is a huge gap between the prevalent population and the diagnosed population. We estimate maybe, at this time, around 10% have actually been diagnosed with tardive dyskinesia and not all of those are on VMAT2.

Our focus is going to remain on new patient additions and getting patient access to drugs. The initiatives that we've laid out, the commercial team expansion, the Talk About TD disease state awareness campaign, have definitely lifted our trajectory from a new patient start perspective, but where does it go from here.

Our focus is going to continue to be quarter-to-quarter and continuing -- and continually expanding this market from a diagnosis perspective. So how I describe it is, we have seen a big step up for the last two quarters.

Will it continue on that level of the trajectory? Our expectations are we're going to continue to call at the same frequency with the providers that we are today and remain focused on new patient additions..

Great. That's very helpful. And then maybe -- sorry, go ahead..

No. Jay, the only other thing that I was going to add to that is, again, just the statement that we've only been through one real Q3 as of yet, and that was in 2018.

And as you know, expectations for Q3 or being able to draw conclusions from that Q3 are a little bit muddled because we're going through the sales force expansion right in the middle there. So this is going to be the first Q3 that we're going through, so we can actually kind of see exactly what is the seasonal dynamic to Q3.

And at the end of that I think we'll be able -- we'll be better prepared then to kind of talk to you a little bit more about seasonal dynamics. So we're still learning along the way..

And the other aspect is -- and we've talked before, as our patient pool grows, when you have natural discontinuation that fall out the bottom of the funnel, we know as an organization we need to continue to add more and more as an increased base on that funnel -- of that funnel to keep up the growth trajectory that we've had.

So we're mindful of that and this would remind you that when you're thinking about building expectations..

Okay. Maybe if I could ask a capital allocation question.

Based on the strength of your balance sheet and the cash flow you're generating, are there any updates you could share with us with regards to your thoughts on deployment of capital and particularly with regards to potential disease development?.

This is Kyle. Good question.

I think the outset of that, I think, it's important to mention that we're very excited about our internal pipeline that we share with you today as well as a bit of our collaborations, which provide a balance of best-in-class to first-in-class medicines here at Neurocrine as well as the potential to provide cures for patients.

Our first goal is to make sure we execute on what we have in hand first and foremost and there's a lot going on here at Neurocrine as you can see from our earnings release.

That being said, our internal research and preclinical teams as well as business development will continue to work in concert to add programs to the pipeline and I can say and this will no longer continue to be a significant part of our strategy both now and moving forward.

So you can see that we are living up to that with our Voyager collaboration earlier this year. We also had the Jnana collaboration that we reported on towards the end of 2018. We look to continue to build the pipeline by adding projects over time..

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

Kevin and team, very nice quarter. Congrats on the nice top line beat. Lots of good questions asked. Had one additional one on INGREZZA though.

In terms of the prescriber base, are you getting more traction with psychs or neurologists? And are neurologists playing a bigger role in terms of new patient adds? And would you anticipate with the assuming approval of opicapone that, that could be further, I guess, enhanced?.

Charles, it's Eric. So I would say that our results from a neurology versus psychiatry perspective remain in line with the promotional effort that we're allocating across those two physician specialties. Essentially, about 80% of our call activity is directed towards specialists in psychiatry and then the balance is towards neurology.

In terms of how that plays out with new patient adds, I don't think that there's any differential growth from a new patient perspective. Keep in mind that most of the undiagnosed patients with TD are really in the psychiatry area.

Patients that get treated by neurologists have been referred most commonly from a general neurologist or even a primary care physician. So -- or in instances, where a patient self refers to that neurologist.

So certainly, the neurologists are very conversant in making the diagnosis and certainly very comfortable with treating TD with INGREZZA, but I'd say the majority of our acceleration of TRx and NRx is coming from psychiatry, which is where we have the majority of our promotional effort.

And I think it's really a testament to the high performance of our team as Kevin mentioned earlier..

That make sense to me. One quick question for Eiry.

Regarding VMAT2 inhibition, you just mentioned this towards the end of your prepared remarks and I know it's not duly the focuses here, but I would like to hear when you might be able to designate a second candidate and a second targeted indication? Do you sense that could be this year? Or is it maybe next year?.

We're actually continuing to work through Phase I with this molecule and we're pleased with the progress in Phase I. We are working on our Phase II program and as soon as we have the clinical trial available for that initial Phase II study, we will post starting from the clinicaltrials.gov and, obviously, then be communicating around that.

And as you mentioned given this is a very important platform to us, we have continued research efforts going on back in discovery to identify potentially future candidates as well that we might bring into the clinic in due course..

I'm sorry if I missed it, but is it possible the second or the Phase II could be by the end of this year that you might mention? Or post then in clinical trials that were to be next year?.

We're still working through that and we'll update you as we have that timing openly..

Our next question will come from David Amsellem with Piper Jaffray..

Okay. So two quick ones. So first on business development.

You have a large sales force now, an expanded sales force that one sensibly could look at as a leverageable asset, so in that vein, how do you think about the acquisition of commercial ready or even what, I guess, we call market ready assets, either in neuro or at psych? Or are you mainly going to be focused on pipeline and assets on the more novel end of discussion? Second question is on VMAT2 inhibition.

More generally, can you comment on where you think you're taking the next molecule? Maybe the types of -- maybe I understand you're not going to commit fully, but as you think about movement disorders, psychiatric disorders, should we think about it being a rare indication or something more extensive, maybe help us understand your thinking there?.

This is Kyle. On the business development piece, I think there's a couple of variables that we think about. We discussed the opportunity from a commercial asset perspective, I think overarching when you think about those types of products, you typically are talking about public companies.

We know the vast majority of those opportunities, concerns there are that the market specificity runway or patent is not one that we would see as valuable as perhaps some of the things that we're talking about here today in terms of our own pipeline assets.

The other pieces that we worry about are a product that might be launched and disrupt the good progress that we made on INGREZZA. And on opicapone, in terms of needs, we'll have two products in the bag moving forward. So we also consider that as well.

And then, lastly, if it's a product tied to a company, think about it as an M&A type of opportunity, as a licensing opportunity, and all these things go into our thinking about an optimal product for a licensing.

I think what we -- where we get to, ultimately, is looking at products that are new chemical entities that perhaps may not be a commercial product this year or next year, but maybe a couple of years down the road that might be a good step for us offering something, that's a bit different that we have the pipeline, but still within neurology and psychiatry.

So I think in terms of your VMAT2 question, I'll let Eiry touch on that a bit..

Thanks for the question. We are very committed to the VMAT2 mechanism and believe the inhibition of VMAT2 can provide potential value in a broad range of neurological and psychiatric disorders.

And so as we bring forward novel molecules to this target, including the one that we now have in the clinic, we want to be examining the specific characteristics of each of those molecules in order to decide best way to position them and take them forward. So that's really is what I could say at this point in time..

Our next question will come from Jeff Hung with Morgan Stanley..

Congrats on the quarter. For INGREZZA, the net revenue per script was higher than last couple of quarters.

So besides the lower impact due to Medicare Part D, were there other factors in 2Q? And do you see these higher net revenue per script as an ongoing trend or more specific to the quarter?.

Yes, we really just point you to the impact from the Medicare Part D donut hole, the impact is more pronounced in the first quarter as a result of the price of our drug and the impact of the donut hole on us, and really Q2 reflects having much less exposure. But that's really all that I would flag.

You do deal to some extent with mix between the 40s and 80s and slight mix within the payer universe, but we really, really would just flag the Medicare Part D donut hole..

Okay.

And then, I guess, on the discontinuation of the T-Force PLATINUM, can you talk about what led to the decision at the current time? And did you learn what you would hope to since the top line results for T-Force GOLD were announced?.

Yes. We had announced when we first told the negative data from T-Force GOLD that we would be taking into consideration all the data that we could generate from T-Force PLATINUM. And looking at the data to distinguish whether or not there was a path forward for valbenazine in Tourette's, I think we looked at the totality of those data.

It's important to say that the discontinuation of T-Force PLATINUM was not on the basis of any safety finding or any challenges on the safety and tolerability front, but all in all we decided, it would be appropriate time for us to take a setback, look at the data in totality, and determine whether or not there were any steps forward for us in the future..

And we will take our next question from Marc Goodman with SVB Leerink..

We were just talking about ASPs a second ago. I was curious, this is really the first time you've talked about contracting and whether we should expect ASPs to kind of come down as gross to nets, start to adjust for this contracting and to what extent you guys have done some contracts.

You started to talk about it, but you didn't really get into too much detail on it. Curious about that. And then, second of all, the high end of the spending range has come down. Obviously, we know that you stopped the study for Tourette's, but is that the only thing that changed? It just seem like a big change in numbers.

The Voyager still going to be roughly $50-or-so million as you had mentioned before. And I just want a quick last question, DTC, you guys were on the TV before.

Are you guys still there? Can you just give us the dates of when you were?.

Marc, I'll quick through your questions. From the DTC front, we absolutely expect that to continue throughout the rest of this year and have seen very great response from that program, and are proud of what that was accomplishing from just an overall educational perspective, engaging patients in this process of understanding tardive dyskinesia.

The second piece as it relates to the guidance range. Our initial guidance range was $50 million. Within that band, you did have a component that has to do with Tourette. And that program, obviously, getting taken out of the mix, taken down the top end of that range.

And in addition to that, you do have some assumptions around your clinical programs and other progression and one of those investments being Voyager Therapeutics collaboration. I've previously given a guidance that, that would be between $40 million and $50 million and I would say that that's where our expectation remains to be within that range.

So other than that, Marc, I really wouldn't flag anything beyond on that. As it relates to ASPs and contracting, as we've said before, we've had great access to date, where a lot of our -- a large majority of our prescriptions written ultimately get filled and we've been pleased with that.

We know over time, as the class grows, we may have to engage in contracting. But as Eric mentioned, we look at this as an investment to ensure that patient access continues and that remains to be. Our most important aspect is diagnosis and making sure they can ultimately hit the drug.

So there is nothing material that we flag in the near term from a contracting perspective, but if there were to be anything material, we would give a lead time to the investment community if we thought it was going to be a really significant impact from a net revenue per script perspective..

And we will take our last question from Evan Seigerman with Crédit Suisse..

Congrats on the great quarter. So you have mentioned that there is a natural number of patients who fall off therapy and stop taking the therapy.

Can you help us quantify what percent of patients these are? And of these patients, what is the average duration of therapy that these patients are on INGREZZA for?.

typically antipsychotics, antidepressants et cetera. If you look at published data on persistency, you'll see that over the course of a year, patients take their medicines in the range of 50% to 60% of the time.

We have stated previously that the persistency has been better than that with INGREZZA since the early days of the launch and really through, and including up to the most recent quarter, we've seen favorable persistency rate. So we feel good about that as one of the drivers of our growth..

And then just a follow-up on contracting. This has been kind of a topic on this call.

Does this have anything to do with the Express Scripts decision to exclude INGREZZA from the National Preferred Formulary? Have you been getting similar feedback from other payers in the United States?.

So the short answer is no. We actually made the decision not to bid for the Express Scripts Formulary simply because we didn't think that it would have a significant impact on the upside for patient access.

We said previously that commercial is the smaller segment for us, and the Express Scripts Formulary represented less than 1% of our patient volume. And so that didn't really have any meaningful impact on really our strategy. As I said before, our strategy has been to make sure that patients have access to medication and preferably open access.

Where we choose to engage with the payer is because we think that it's going to have an impact to the upside in terms of their access and we do it as an investment for the future. So the Express Scripts situation didn't really impact our strategy or our results. However, we have begun to engage with payers on a limited basis.

And as Matt said, if there is any meaningful impact on our gross to net, certainly we'll disclose that..

And there are no further questions. I will turn it over to Kevin Gorman for final remarks..

Thank you very much. I think as most of you have been following us, you understand that we've learned quite a bit in the two years since we launched INGREZZA and we have a lot more to learn. We've only just begun to address the needs of these patients and the needs of the psychiatric community at large.

We will be constantly adapting our efforts to bring this important treatment to patients. So you will see us adding more initiatives over time because as you've heard over and over in this call, it's education, it's assets, it's being able to service patient's needs, and that's what we're dedicated to.

We will also continue to progress and expand our pipeline by investing in the interim groups here at Neurocrine and partnering with exceptional science externally as Kyle and his team and the broader teams that Neurocrine work together to do that stuff.

And finally, we've enjoyed the success that we've had by being disciplined and investing in good science. And you can count on us that we will continue to do so. So with that, I thank you very much for your attention and I look forward to talking to you in upcoming meetings..

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