Good day, everyone and welcome to the Neurocrine Biosciences Third Quarter 2019 Results Call. [Operator Instructions] It is now my pleasure to turn today's conference over to the CEO of Neurocrine Biosciences, Kevin Gorman..

Thank you, and welcome everyone to our earnings call. I am joined by Matt Abernethy our Chief Financial Officer; Eiry Roberts, our Chief Medical Officer; Eric Benevich, our Chief Commercial Officer; Kyle Gano, our Chief Business Development and Strategy Officer; and Todd Tushla, the Head of Investor Relations.

Before we begin, I’d like to ask Todd, to read our safe harbor statement..

Yes, good afternoon, everybody. 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 third 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, Todd. So this quarter, I am very pleased yet once again to have another record number of new patients initiated treatment with [Technical Difficulty] Neurocrine colleagues in the field, healthcare providers [Technical Difficulty] and more confident in diagnosing those with tardive dyskinesia.

Now as I’ve always said this, there is still much more work to be done here as the vast majority of TD suffers remain undiagnosed and untreated. We continue focused on educational programs, in the physicians' office and at medical conferences, and to grow awareness of TD through our talk about TD campaign.

Now, I’d like to drill down just a little bit more into the results this quarter. As we've talked about the seasonality of INGREZZA.

We've said that medications for this patient [Technical Difficulty] in Q3, but we haven't been able to accurately predict what those will be for INGREZZA that is because in last year's Q3, as you recall we were going through a sales force expansion and [Technical Difficulty] experience of Q3 where we can observe seasonality without any confounding variables or at least none that we are aware of while there was a seasonal impact, it was relatively small.

We said all along pending [ph] launch and going through this quarter adds one more piece to the puzzle or understanding of serving this patient healthcare providers and the payer dynamic. Matt and Eric and the rest of the team, will be happy to discuss this further in the Q&A portion of the call.

Now in addition to INGREZZA, we've made significant progress on our pipeline. A few of the highlights [Technical Difficulty] trial with valbenazine to treat Chorea associated with Huntington's disease.

[Technical Difficulty] initiation of a Phase II trial, we've also been engaged in encouraging and collaborative discussions with FDA and European regulators on the pivotal program for adults suffering from CAH.

And in addition to those discussions with the FDA, we are looking forward to our FDA interactions to discussing the gene therapy for Parkinson's patients and the pivotal program with VY-AADC. And then finally, we're making good progress on our anticipated launch preparations for opicapone for people suffering with Parkinson's.

[Technical Difficulty] PDUFA date for opicapone is April 24. So those are my brief opening remarks what I’d like to do is for the remainder of the call. I'm going to turn it over first to Matt, then the [Technical Difficulty]. So Matt please..

Yes, thank you, Kevin, and one clarification the PDUFA date is actually April 26 of 2020..

I knew I’d mess that I have given like two of that 24th date and wrong a couple of times..

Yes, but thank you all for joining our third quarter 2019 earnings conference call. Our Q3 results featured another strong INGREZZA performance and included the recent NDA submission of elagolix for uterine fibroids, which was submitted by our partner, AbbVie.

During the third quarter, INGREZZA prescription volume increased to approximately 34,800 scripts, resulting in a 198 [Technical Difficulty] product sales. This compares to 19,400 scripts and $111 million [Technical Difficulty].

Our third quarter sequential growth of 3,200 TRxs was primarily driven by another record quarter of new patient additions, tempered slightly by seasonal pressures impacting refill rates per patient.

Importantly, we are seeing continued new patient demand as a result of the success of our expanded commercial organization, our patient focused Talk About TD disease state awareness campaign, and our ongoing healthcare provider educational initiatives. Sequentially, Q3 net revenue per script held steady at $5,700 per script.

Year-to-date through Q3, [Technical Difficulty] $515 million, representing over 80% year-over-year growth. Q3 net income was $54 million or $0.56 diluted earnings per share, [Technical Difficulty] related to the FDA's acceptance of the NDA for elagolix.

In addition, net income was impacted by a $28 million unrealized non-cash loss due to the mark-to-market impact of our Voyager Therapeutics equity investment. Turning to the balance sheet, we exited the quarter with $875 million in cash and investments, up $109 million sequentially, driven by our strong Q3 operating performance.

Our cash position and profit profile provide us sufficient capital to execute our near-term strategy to maximize our opportunity with INGREZZA, invest in our internal R&D [Technical Difficulty] to expand our pipeline through business development activities.

Regarding our [Technical Difficulty] IPR&D, we are expecting full year SG&A and R&D expense to range from $540 million to $550 million, which compares to our previous guidance range of $540 million to $570 million. I'd like to provide a few comments about our revenue outlook for the fourth quarter of 2019.

We remain encouraged by the progress our entire team is making in developing the tardive dyskinesia market. Our commercial efforts remain unchanged with a focus on increasing awareness of tardive dyskinesia and increasing the number of patients being treated for their tardive dyskinesia.

In addition, we expect there to be [Technical Difficulty] net discount in Q4 as a result of accounting dynamics associated with the year-end channel inventory. In closing, we are pleased with the strength of our quarterly performance. Looking ahead, by this [Technical Difficulty] medicines across four indications.

We've made great progress with our commercial and pipeline programs and continue on a path towards becoming a leading global biopharmaceutical organization. With that, I will now hand the call over to our Chief Medical Officer, Eiry Roberts..

Thank you, Matt, and good afternoon. I'm happy to provide an update on clinical efforts this quarter in support of our movement disorder programs for tardive dyskinesia, Huntington's disease and Parkinson's disease, as well as our congenital adrenal hyperplasia and Phase I program.

In the [Technical Difficulty] biosciences presented data from INGREZZA, opicapone and VY-AADC [Technical Difficulty] Congress of Parkinson's Disease and Movement Disorders. The presentations at this Congress reinforce our commitment to educating healthcare providers and to improving the lives of patients living with movement disorders.

For INGREZZA, we presented data demonstrating robust long-term and clinically significant benefits in patients with tardive dyskinesia for both 40 milligram and 80 milligram dose strength across a broad range of patient subset.

Furthermore, pool's [ph] clinical trial data presented, showed a greater than 50% improvement in abnormal movements in more than half of patients taking the once-daily 40-milligram dose of INGREZZA.

In addition, in August, we published an indirect treatment comparison of valbenazine versus [Technical Difficulty] using pool's clinical trial data, which demonstrated that [Technical Difficulty] particularly at the 80 milligram dose level.

It is however important to note in this study that differences in dose titration and dose equivalency should be considered when interpreting the results. These data in aggregate provide healthcare professionals with important additional information to inform choice of treatment and dose selection for INGREZZA in patients with tardive dyskinesia.

Moving now to our Parkinson's [Technical Difficulty], at MDS, we presented data on opicapone, demonstrating that once-daily [Technical Difficulty] disease resulted in substantial and prolonged inhibition of the catechol-O-methyltransferase enzyme.

For Parkinson's patients experiencing motor fluctuations, inhibition of this important enzyme prevents levodopa breakdown, thus allowing more levodopa to be converted to dopamine in the brain resulting in reduced off time with increased on time without troublesome dyskinesia.

From a regulatory perspective for opicapone, we remain on track for a PDUFA date of April 26, 2020.

For the VY-AADC gene therapy program, acquired through our strategic collaboration with Voyager Therapeutics, at MDS, we presented data from a longitudinal analysis of Parkinson's disease stage for patients treated in the open-label [Technical Difficulty].

These data demonstrate that a single administration [Technical Difficulty] overall disease severity, as assessed by the modified Hoehn and Yahr stage..

Eiry I am sorry to interrupt we are getting a lot of text messages right now that we’re cutting out quite a bit of our discussion here. Operator David if you are listening right now..

Yes sir I can pull your line separately and we can address the issue..

Okay, so why don’t we take one minute time out or [Technical Difficulty] believe the issue is resolved..

We’ll do..

Please initiate..

Yes participants please stay on the line until we have re-initiate today’s call. [Technical Difficulty] Thank you for your patience all lines are reconnected..

Yes, I apologize everyone for this and thank you for bring into our attention by texting Matt and myself. If there are continued problems don’t hesitate to text us yet once again. Hopefully this is going to go better this time.

What we’re going to do is because it’s unclear how was lost by everyone and going through this and we want to make sure the transcript is clear we’ll just start over again.

So again I am joined by Matt Abernethy our CFO; Eiry Roberts, our CMO; Eric Benevich, our CCO; Kyle Gano, our Chief Business Development and Strategy Officer; and Todd Tushla, the Head of HR – IR I am sorry. Todd, could you please read our safe harbor statement..

Yes, good afternoon, everybody. 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 third 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, Todd. As I said we’ve had yet another record number of new patients initiated treatment with INGREZZA.

This is through the skill and the diligence of our Neurocrine colleagues in the field, addressing healthcare providers allowing them to be more skilled in recognizing abnormal involuntary movements among their patients and actually more confident in diagnosing those with tardive dyskinesia.

I keep saying that there is a lot more work to be done here as the vast majority of TD suffers remain undiagnosed and untreated. We'll continue our focus on educational programs, both in the physicians' office and the presentations at medical conferences, and to grow awareness of TD through our Talk About TD campaign.

Now going into a little more detail, with the INGREZZA results this quarter I know we've talked about seasonality quite bit in the past.

We've said that medications for this patient population experienced challenges, headwinds in Q3, but we haven't been able to accurately predict what those will be for INGREZZA this – past quarter, and that was because in last year's Q3, we were going through a sales force expansion.

Now, this year was our first experience of Q3 where we could observe seasonality without any known confounding variables and while there was a seasonal impact, it was relatively small.

Now, this experience of going through this Q3, it adds one more piece to the puzzle of our understanding of this patient population, the healthcare providers and the payer dynamic. And Matt, Eric and the rest of the team, if you care to speak about this more can go into this – further in the Q&A portion of the call.

In addition to the outstanding results with INGREZZA, we've made significant progress in our pipeline. One, we've – initiation of a Phase III trial with valbenazine to treat Chorea associated with Huntington's disease.

Two the initiation of the Phase II trial in pediatric patients with CAH, three, we've also been engaged in encouraging and collaborative discussions with FDA and European regulators on the pivotal program for adults suffering with CAH.

And in addition with FDA, we are looking forward to discussing our gene therapy for Parkinson's disease, with the pivotal program with VY-AADC. And then finally, we're making very good progress on our – for our anticipated launch getting prepared for that with opicapone for patients suffering from Parkinson's disease.

Given a second chance around, now the PDUFA date for opicapone is April 26. So with that, I'm going to turn it over to Matt..

Thank you, Kevin, and good afternoon Thank you for joining our third quarter 2019 earnings conference call. Our Q3 results featured another strong INGREZZA performance and included the recent NDA submission of elagolix for uterine fibroids, which was submitted by our partner, AbbVie.

During the third quarter, INGREZZA prescription volume increased to approximately 34,800 scripts, resulting in $198 million in net product sales. This compares to 19,400 scripts and $111 million in net product sales for the third quarter of 2018.

Our third quarter sequential growth of 3,200 TRxs was primarily driven by another record quarter of new patient additions, tempered slightly by seasonal pressures impacting refill rates per patient.

Importantly, we are seeing continued new patient demand as a result of the success of our expanded commercial organization, our patient-focused Talk About TD disease state awareness campaign, and our ongoing healthcare provider educational initiatives. Sequentially, Q3 net revenue per script held steady at $5,700 per script.

Year-to-date through Q3, INGREZZA net sales were $515 million, representing over 80% year-over-year growth. Q3 net income was $54 million or $0.56 diluted earnings per share, which included a $20 million event-based milestone from AbbVie related to the FDA's acceptance of the NDA for elagolix.

In addition, net income was impacted by a $28 million unrealized non-cash loss due to the mark-to-market impact of our Voyager Therapeutics equity investment. Turning to the balance sheet, we exited the quarter with $875 million in cash and investments, up $109 million sequentially, driven by our strong Q3 operating performance.

Our cash position and profit profile provide us sufficient capital to execute our near-term strategy to maximize our opportunity with INGREZZA, invest in our internal R&D programs, and ability to expand our pipeline through business development activities.

Regarding our expense guidance for 2019, excluding IPR&D, we are expecting full-year SG&A and R&D expense to range from $540 million to $550 million, which compares to our previous guidance range of $540 million to $570 million. I'd like to provide a few comments about our revenue outlook for INGREZZA for the fourth quarter 2019.

We remain encouraged by the progress our entire team is making in developing the tardive dyskinesia market. Our commercial efforts remain unchanged with a focus on increasing awareness of tardive dyskinesia and increasing the number of patients being treated for their tardive dyskinesia.

In addition, we expect there to be an elevated gross to net discount in Q4 as a result of accounting dynamics associated with the year-end channel inventory. In closing, we are pleased with the strength of our quarterly performance.

Looking ahead, by this time next year, Neurocrine is positioned to have three FDA approved medicines across four indications. We've made great progress with our commercial and pipeline programs and continue on a path toward becoming a leading global biopharmaceutical organization.

With that, I will now hand the call over to our Chief Medical Officer, Eiry Roberts..

Thank you, Matt, and good afternoon. I'm happy to provide an update on clinical efforts this quarter in support of our movement disorder programs for tardive dyskinesia, Huntington's disease and Parkinson's disease, as well as our congenital adrenal hyperplasia and Phase I program.

In the third quarter, Neurocrine Biosciences presented data from INGREZZA, opicapone and VY-AADC at the International Congress of Parkinson's Disease and Movement Disorders. The presentations at this Congress reinforce our commitment to educating healthcare providers and to improving the lives of patients living with movement disorders.

For INGREZZA, we presented data demonstrating robust long-term and clinically significant benefits in patients with tardive dyskinesia for both 40-milligram and 80-milligram dose strength across a broad range of patient subset.

Furthermore, Pool's clinical trial data presented showed a greater than 50% improvement in abnormal movements in more than half of patients taking the once-daily 40-milligram dose of INGREZZA.

In addition, in August, we published an indirect treatment comparison of valbenazine versus deutetrabenazine efficacy, using pool's clinical trial data, which demonstrated that valbenazine was generally favorable over deutetrabenazine, particularly at the 80-milligram dose level.

It is however important to note in this study that differences in dose titration and dose equivalency should be considered when interpreting the results. These data in aggregate provide healthcare professionals with important additional information to inform choice of treatment and dose selection for INGREZZA in patients with tardive dyskinesia.

Moving now to our Parkinson's disease program. At MDS, we presented data on opicapone, demonstrating that once-daily dosing in patients with Parkinson's disease resulted in substantial and prolonged inhibition of the catechol-O-methyltransferase enzyme.

For Parkinson's patients experiencing motor fluctuations, inhibition of this important enzyme prevents levodopa breakdown, thus allowing more levodopa to be converted to dopamine in the brain resulting in reduced off-time with increased on time without troublesome dyskinesia.

From a regulatory perspective for opicapone, we remain on track for a PDUFA date of April 26, 2020.

For the VY-AADC gene therapy program, acquired through our strategic collaboration with Voyager Therapeutics, at MDS, we presented data from a longitudinal analysis of Parkinson's disease stage for patients treated in the open-label Phase 1b trial PD-1101.

These data demonstrate that a single administration of VY-AADC improved patients' overall disease severity, as assessed by the modified Hoehn and Yahr stage.

We continue to work closely with our colleagues at Voyager to progress the Phase II VY-AADC gene therapy program, including engagement with the FDA before year-end to gain further clarity on the registration plan.

During Q3, we also continue to work with Voyager Therapeutics to bring forward subsequent programs targeting Friedreich's ataxia and two novel neurological targets. Turning now to our other clinical development programs. Last month, we initiated a Phase III KINECT-HD trial of valbenazine for the treatment of Chorea in Huntington's disease.

This study will enroll approximately 120 subjects across multiple centers in the U.S. beginning this month. The primary efficacy endpoint compares change from baseline in the Unified Huntington's Disease Rating Scale Total Maximal Chorea score between valbenazine and placebo.

We are pleased to be collaborating with the Huntington's study group in the design and implementation of this study and anticipate completion of the study during 2021. For congenital adrenal hyperplasia, we made progress on several fronts during Q3.

The adaptive Phase II proof-of-concept study of NBI-74788 in adult subjects with CAH is nearing completion, and we intend to present data from this study at a scientific meeting during 2020. We also had discussions with the FDA to obtain alignment on the registrational trial design required for the adult CAH program.

We're currently in the process of reviewing this plan with regulators outside the U.S. with the intent of initiating a global registration trial in adult subjects with CAH during mid-2020.

Finally, our internally discovered vesicular monoamine transporter 2 inhibitor with potential for use in the treatment of a range of neuroscience disorders continues in Phase I evaluation.

In summary, I'm very pleased with the progress in our pipeline this quarter, and want to thank our cross-functional teams for their hard work in support of the portfolio. With that, I'll hand the call back to Kevin..

Thank you, Eiry. So at this time, I'd like to open it up for questions..

[Operator Instructions] And we will take our first question from Brian Skorney with Baird. Please go ahead. Your line is open..

My first question is just on the plan to move valbenazine into the Huntington's Chorea study. I think in the past, you've kind of been skeptical about pursuing this back in the days when deutetrabenazine was in clinical development.

What sort of changed in your view, Kevin, to move forward here? Is it really just a function of saying why not work to expand the label to capture some of these sales available or is there something in the kind of commercial launch that you guys have been working through that line?.

Yes, Brian, it was -- you're right. In the past, we had deprioritized Huntington's because we had prioritized Tourette. After the Tourette study, that's when we reprioritized back up Huntington's disease. We think there is still very much a role that valbenazine can play in the Huntington's population and so that's why we've gone back into it.

And I think there is more to learn about drug development within Huntington's too and that's another.

Do you have anything to add to that, Eiry?.

Yes, I mean, the only that is there are 30,000 patients with Huntington's and the chorea's symptoms are very common, up to 90% of patients with Huntington's have symptoms of chorea. 70% of those Huntington's patients have deemed to have moderate to severe symptoms, but less than 20% of them are treated today with VMAT2 inhibitor.

And so, given the favorable benefit risks that we have a profile that we have in tardive dyskinesia, the well-tolerated once-a-day regimen that we have with a simple titration schedule, we were really interested in understanding valbenazine in the context of treatment of chorea and Huntington's disease as well..

Great.

And then, just another question on the, you mentioned that you would expect a little bit of a separation in gross and net in fourth quarter, could you just walk through exactly what's happened in the fourth quarter that's not driving that separation?.

Yes, sure, Brian. If you recall, we discussed this last year as well.

So since we recognize revenue on a sell-in basis now, what you have to do from a gross to net perspective is think about when that ultimately get sold through to the customer, what would associated discount be surrounding that? So when you think about the slightly elevated gross to net that I flagged, it really pertains to thinking through our channel inventory getting sold through to patients in Q1, which is our highest gross to net discount period due to items like the donut hole..

We'll take our next question from Tazeen Ahmad with Bank of America. Please go ahead. Your line is open..

Maybe one on opicapone. Kevin, can you give us an idea of what your potential at least targeted market might be at the onset of the launch? And can you talk about what kind of investment in your commercial organization you're going to need if any at all from here in order to make that a successful launch? And then, I have a follow-up. Thanks..

Tazeen. I'm going to pitch that over to Eric to my left..

Yes, hello. So I didn't catch all of your questions, but I think I got the gist of it. You were talking about -- you're asking about the sort of the target audience and incremental investment. So, one of the things that makes opicapone attractive to us amongst many is the fact that it is a really nice synergistic add into our commercial footprint.

As you are aware, we already call on all of the movement disorder neurologists in the country for INGREZZA and when we looked at the opportunity with opicapone, it became clear that there really was very few additional neurologists that we would need to add into our call universe to adequately cover the opportunity.

With regard to the incremental investment, when we made the expansion of our field sales team in 2018, it was with two goals in mind. One was to optimize for the TD opportunity with INGREZZA. The second goal was to prepare for the eventual approval and launch of opicapone. So, we've already expanded our team adequately to cover both of those goals.

And like I said, we're currently calling on the target audience. So, from an incremental investment perspective, we're really just talking about additional outside spend associated with sales and marketing, advertising those kinds of activities, but not really much in the way of headcount..

And are you able to share, Eric, with us any of the market data that you've collected about where in their treatment regimen doctors would feel this drug would be most impactful?.

Yes, I'll give you a little bit of color. Currently, there are three different classes of adjunctive treatments that are used to essentially improve the effectiveness of levodopa add-ons to levodopa therapy. You've got dopamine agonist, you've got MAO-B inhibitors and you've got COMP inhibitors.

In terms of COMP inhibitors, this is really a class that has been somewhat dormant for a number of years here in the U.S., two different agents were introduced. The first one, tolcapone has exhibited good efficacy.

So there was a lot of enthusiasm in the neurology community, then unfortunately hepatotoxicity emerged and that product was pulled off the market. The second product, entacapone, was introduced with, I would say, mixed results and mixed receptivity.

Certainly, it didn't have the hepatotoxicity issue, but it's a relatively less potent agent from an efficacy standpoint. It's inconvenient in terms of being needed to be dosed every time a patient takes their levodopa dose.

So, three, four, five, six times a day, they would need to take that medication and there's a number of other rate-limiting side effects associated.

So certainly, the feedback that we've gotten from leaders in the field and from market research indicates there is a need for an agent that addresses those deficiencies, non-deficiencies in the COMPs class and certainly an opportunity to grow not just within the class, but to grow at the expense of the other classes.

And our aspiration is to make opicapone the go-to adjunctive treatment for patients on levodopa therapy..

We'll take our next question from Paul Matteis with Stifel. Please go ahead. Your line is open..

Thanks so much for taking my questions, and congratulations on all the progress. I have one follow-up question for Matt's comments surrounding script or average script per patient. New scripts sequentially were not up nearly as much as they were in the past couple of quarters, but you still were had a record number of new patient adds.

Could you quantify for your existing patient base coming into the quarter, the average number of script per patient in 3Q as compares to 2Q or if you can’t quantify maybe you can qualitatively comment? And then separately, I was wondering if you could talk about just visibility into contracting.

How you're thinking about that for 2020? And if you're expecting gross to net to change materially in the foreseeable future? Thanks so much..

Paul, just quickly, kind of it the tail-end of your first question. You cut out for a few words.

Could you try that again, and operator, if you could maybe look into if there is anything else that we might be worried about with this line, but Paul, could you try that question again?.

Yes, sure. Kevin. Thanks. Basically, I was alluding to script growth this quarter and how -- it's still solid, but there seems to be discrepancy this quarter between script growth and then you’re still reiterating that you had a record number of new patient adds.

So, I was wondering if you could speak to the underlying patient base coming into the quarter? And what you observed in 3Q for average script per patient? And how that may have changed, as it relates to past quarters?.

Yes, Paul, this is Matt. Appreciate the question. And as Kevin said in his prepared remarks and as you've heard us comment on before, our number one focus as an organization is to drive the new patient additions and get more patients on INGREZZA, and that's exactly what we have seen and what our initiatives continue to push toward.

But on the existing patient front, as we alluded to, and as I alluded to in my prepared remarks, we saw no deviation in discontinuation rates. And then from a refill rate per existing patient, as Kevin said, we did see some level of seasonality, but it was very small and likely not worth calling out.

The other aspect, just to contextualize and remind everyone is that when you look at our sequential growth in Q2, that was largely a factor of having a really low baseline in Q1, and patients getting normalized back on to what a standard refill rate per patient.

So, how I would describe a refill rate per patient Q2 versus Q3 is just slightly less in Q3. I'll let Eric comment on where we're at from a contracting perspective, but I'll take the gross to net front.

Based upon what we know today, Paul is that we wouldn't expect any meaningful change and where we're at from a net revenue per script perspective based upon everything that we know at this time..

Yes, hi, Paul. So, as we said before, patient access is a really critical priority for us. And historically, being on or off formulary hasn't had a really meaningful impact on reimbursement. We've had over 70% of written prescriptions have been filled to-date through the launch.

And certainly, we've been pleased with the affordability where over three quarters of patients are paying less than $10 per month for INGREZZA.

In terms of the way that we worked with the plans, our goal has been to ensure equal access, we really want to make sure that patients and providers have a choice of therapies, and that's the approach that we've taken in looking at contracting opportunities. And so, we've said that we will address contracting opportunities on a plan-by-plan basis.

Here we are, it's Q4 the plans are just now starting to publish, their contract, or excuse me, their formulary designs for 2020. I'm not going to comment on a plan-by-plan basis, but I will say that it's a little bit early and I think we'll know more as we get into next year.

But overall, we've been, like I said, successful with our efforts to ensure patients have affordable access to INGREZZA and that's really what we endeavor to ensure going forward into 2020. So stay tuned..

Okay, great. Thanks guys for the color..

We'll take our next question from Phil Nadeau with Cowen and Company. Please go ahead. Your line is open..

Good afternoon, thanks for taking my questions and congrats on the progress. First, just one more on the gross to net and then, curious if you care to quantify how much of an increase we could see in Q4 versus Q3? And then follow-up on the pipeline, you mentioned that the CAH protocol, I think has been defined with the FDA.

Can you confirm whether that's correct, I'm curious whether you'd be able to provide us with any information what the primary endpoint of the studies will be assuming the European regulators agree with the plan?.

So we’ll start with Matt with the first part..

Yes hi, Phil thanks for the question. On – to think about Q4, what I would maybe recommend is look what happened last year Q3 to Q4 we did have a slight decline in our net revenue per script. And then also consider, we did have a price increase, I believe at some point, middle of the quarter last year.

So, it's not it's -- not a 3% to 5% type gross to net discount, it's less than that, but I think if you look back on what happened in the prior year, that may get you into the right ballpark..

And Eiry, do you want to talk about our FDA interactions thus far?.

Yes, I can talk about that in general. As I mentioned in the written comments – spoken comments, we've been encouraged by our interactions with the agency, they clearly have been responsive to our discussion with them around the design and proposal for the registration plan for adult CAH.

And in terms of the design and the endpoints, I would just say that learnings have been very consistent with what we've reflected in the past. We understand that for these patients, management of key steroid hormone levels such as androgens are critical.

And in addition, we know that there is a desire in the patient population and net prescribers to be able to optimize the requirement of glucocorticoids dosing.

And so we've taken those into consideration as we've designed the study and as I mentioned, we're quite pleased with the progress forward with both the FDA and now in terms of our interactions with European regulators..

Yes. And Phil, will be more forthcoming as we get closer to launching the study off and as you can appreciate you want to complete all of your discussions with regulators before you really start talking about them in detail..

Got it the prior guidance was for Q4 launch, is that still on track?.

No, we are looking at now with the discussions we've had and bringing the European regulators into this both and wanting to kick these off and make sure that we have a completely harmonized interaction. We're looking into the middle of next year..

We'll take our next question from Anupam Rama with JPMorgan. Please go ahead. Your line is open..

Thanks for taking the question and congrats on all the progress. Just as you've gotten more market data here on INGREZZA launch.

What are your latest thoughts on giving forward-looking guidance here for INGREZZA, and I've gotten this question a couple of times in the last week, but perhaps giving guidance at this small Investor Conference in San Francisco in the second week of January?.

Well, Anupam, I definitely understand where you're coming from with your comment your small conference will not be so small. But as you know as a company, our approach to guidance has been to just give a qualitative color as to what we would expect for the coming quarter.

This launch is definitely been a launch that we've learned a lot over the last 2.5 years post launch and then walking into this year, thinking about expanding our sales force by 50%. And then also launching the unbranded Talk About TD disease awareness campaign, those were two very large variables that we wanted to work through.

So, if we did ever provide a guide, it would likely be in the form of an annual guide, that's something we have continued conversations and considerations around, but at this time for 2019, are not providing any INGREZZA guidance..

We'll take our next question from Biren Amin with Jefferies. Please go ahead. Your line is open..

Maybe just a follow-up on the CAH pivotal program, Kevin what is – how consistent are the regulatory requirement is going to be across both FDA and EMA? Clearly, I think you've talked about pursuing a biomarker strategy with the possibility of evaluating steroid reduction do you think that will be consistent across both agencies?.

So I'm going to just – you cut out a little bit there, but I think what you're asking about is the endpoints where consistency between both our regulators. I'm just going to preface [ph] by saying that while we still are in active dialog with both agencies, we are not going to go into great details on things.

I would say that the steroid biomarkers are at the heart of what we're looking at in this and Eiry, probably you would like to add to this if any?.

No, I think the learning is very consistent with what we've discussed previously in terms of both the steroid hormone levels themselves particularly androgens being of great importance to patients and to all of the stakeholders.

In addition, the ability with this mechanism of action to reduce the level of long-term glucocorticoid treatment that's required is also not surprisingly coming across as an important feature..

The impact of the DTC campaign and it's been ongoing for several quarters now, has it met your expectations? Do you plan to change or modify the program at all?.

So Anupam, I'm going to assume that your entire question there was about the DTC - Biren I'm sorry, I think the entire – that your question was about and its entirety to the DTC program. [Technical Difficulty] if we can tell you about the impact that it's had as of yet, was there anything that you preface that with..

I do apologize we are getting a heavy level of static from his line..

So Anupam we'll try to – I'm sorry Biren, jeez, I don't know why I keep doing that. Biren, let's have Eric answer that question. Sorry about what may be happening to your line, I hope this isn't systemic..

Yes, so hey, Biren, what I would say in terms of the experience that we've had thus far with the disease state awareness campaign for TD, which is Talk About TD, is that we've been very pleased with the response.

We launched it at the beginning of this year, we were hopeful that we would get a good response in terms of unique visitors, people spending time, looking at the content, downloading the videos, registering to come into our database, and thus far, it's exceeded all of our expectations.

And anecdotally, we've heard very positive feedback from our customers through our field sales team. People going into clinics and going into some of these practices and being asked, are you the company that sponsoring the educational content that I saw in that ad last night.

So, our plan going forward is to continue to invest in this disease state awareness campaign. We expect that we will continue to have time periods where we're on the air and then time periods where were off the air.

But going forward into 2020, this is just another area where we're going to continue to invest in what is still a very early stage of the overall development of this TD market. And certainly, we think it's to the benefit of the many, many patients out there that are as yet undiagnosed and suffering from TDs.

So, you can expect that we're going to continue to focus on educational efforts in this area and in others..

We'll take our next question from Jay Olson with Oppenheimer. Please go ahead. Your line is open..

Thanks for taking the questions, and congrats on the record number of new patient starts. Can you describe some of the key levers that you're pulling to drive those three consecutive quarters of new patient starts. And are these new patient dynamic something that we should expect to continue in the future.

And then I had a follow-up question on KINECT-HD, it doesn't show the dose on clinicaltrials.gov. So I was wondering if you're studying the same 40 milligram and 80 milligram doses of valbenazine used for tardive dyskinesia or if it's a different dose.

And if it is a different dose, does that allow – for some additional IP and or differentiated pricing. And if it's not a different dose, did you weigh the alternatives of studying your next-gen VMAT2 inhibitor for Huntington's disease instead of valbenazine? Thank you..

So, Jay, I feel I should call you Berin at least three times. But I just make up, but I'm going to let Eric take the first part of your question..

First of all, congratulations Jay on the multi-part second question. I'll tackle the first question, which is really around what's driving this record new patient starts that we've experienced for the past few quarters. And I really do think it is the cumulative effect of everything that we're doing in the marketplace.

Certainly, I think we're seeing the benefit of the expanded sales team. About this time last year, we had just expanded the field sales team and we're talking back then about legacy sales people versus new hired sales people and the need to get everyone up to the same level of experience and capability.

And I think at this point in time, we're no longer thinking of our team that way. We've got a good, really good cohesive experienced team out there that's doing great work in terms of helping their customers to identify appropriate candidates for treatment with INGREZZA. So, the expanded sales team I think is a big driver of the success.

I just talked a moment ago about the disease state awareness campaign Talk About TD and the fact that we're continuing to see really strong response to that campaign.

And I think it's indicative of the interest and maybe the need for more information for patients and loved ones that are suffering from involuntary movements and wondering could this be TD.

And then, I think that also some of the other elements of our promotional efforts, including peer-to-peer educational events, et cetera are really, really what's driving the record new patient starts. As Matt mentioned, earlier, it's a critical area of focus for us to continue to grow this market opportunity and we're doing it organically.

So, it's hard to tease out which element is having the biggest impact.

But I think, cumulatively, they're all critically important and it's really a testament to the strong execution of all of our customer-facing teams, the field sales team, our field reimbursement team, our field medical team, and I want to just say that they're doing a great job out there..

Thanks, Jay. And I don't have a comment at the moment around the IP strategy. And you're correct. At the current time, we did not publish the doses of valbenazine that we will be used in the HD connect trial in clinicaltrials.gov [ph]. So, but it's just a couple of comments around that.

We're obviously extremely comfortable with the 40 milligram and 80 milligram doses on the simple dosing regimen that we have currently in tardive dyskinesia and the encouraging benefit risk profile that we’ve continue to see around that.

But in a similar fashion to our exploration of Tourette's disorder, we are keen to ensure that we provide flexibility in dosing. We don't want to assume that the dosing strategy in each different disease state would essentially be the same as tardive dyskinesia. And so, we've designed the KINECT-HD study in that fashion.

And that also would translate I think potentially into our future evaluation of next-generation VMAT2 inhibitor candidates..

We'll take our next question from Charles Duncan with Cantor. Please go ahead. Your line is open..

Congrats on the top line and new patient starts performance in the quarter. Had a couple of questions, one commercial one pipeline so, I'll start with the commercial and that is. I think you kind of address this to Anupam's question, which is guidance.

But going into 2020, I guess I'm wondering what you're thinking and that needs to be – needs to occur to be able to start to provide guidance, it seems like you have a better handle on this market? And then, are you thinking about pricing increases going into 2020?.

So, Charles, I'll take the second one. We wouldn't be discussing any potential future price increases.

So, we don't discuss those, but what I would want to add is that I think in the short history that Neurocrine has been a commercial company, we've shown ourselves to have great restraint and to be very sensitive to price and taking any incremental increases.

Matt, do you want to?.

Yes, in regards to guidance absolutely, we've invested in internal forecasting group and do have a much better pulse than we had say, two years ago at the time of launch. Better insight into – patients rate of continuation and then also a better understanding of the impact from the expanded sales force and disease state awareness campaign.

So as we contemplate our guidance, one of the questions is, do we feel comfortable to provide a guide. And then the second piece is really as a company and from an investment community perspective, is that something that's beneficial and appropriate for us to do.

So, we do gather all the information that we have now and that is something if we did provide a guide, we would want to make sure we're comfortable on and we do have a lot more insight today than we did even at the beginning of this year..

Okay, that's fair, Matt and Kevin, thank you. I wanted to ask a follow-up, call it two-part question. So, it's a warning for Eiry, which is – if you just think about the Huntington's chorea program, I think you mentioned that you'd be finishing that study in 2021.

And given the use of standard of care, which is pretty small in that patient population, I'm really kind of wondering what do you think about the timing of data and the rate limiting steps in that program.

And then as a follow-up with just jumping over to AADC [ph], wondering if and I know that you haven't completed your discussions with agency, but if you can imagine being in a pivotal program in 2020 with that one?.

So, on the first question, I actually didn't catch the very end of the question.

So, would you mind just repeating that first part of the question for me?.

Yes just really rate limiting steps to enrollment and timing of data in the Huntington's program?.

Okay. So, the patient population for that trial is 120 subjects approximately, and that will be performed as a multicenter trial across the United States.

And we are actually pretty encouraged by the enrollment rates that we predict for that trial based on our collaboration with the Huntington's study group and what appears to be a significant level of interest in continuing to evaluate a novel VMAT2 inhibitor in valbenazine in this patient population.

That also to me reinforces the fact that there is still significant unmet medical need in this space for patients with Huntington's disease in the treatment of the chorea. And so, we're very encouraged with that and that's what's really driving our thinking about 2021 data release timing there.

With the Voyager VY-AADC program, it's really too early for me to give any comment around our thinking with the interaction with the agency. As Kevin mentioned, we will be in dialog with the FDA this year and we're continuing to progress that initial study as the RESTORE-1 study as rapidly as possible.

And we are obviously starting to think about and plan the subsequent RESTORE-2 study..

We'll take our next question from Brian Abrahams with RBC Capital Markets. Please go ahead. Your line is open..

Just wondering if you had any updates around the competitive dynamics in TD and maybe the balance between overall market growth versus share growth that you might be seeing? And then just as a second question is a follow-up on Huntington's, might you expect any additional sort of -- or any sort of additional monitoring requirements in that study or possible Class labeling with respect to the box warning and how that might potentially impact adoption at all in TD, if at all? Thanks..

Yes, so and thanks, I'll answer the second part of your question. Really, easily that talking about labeling when we've just started out in the indication, it's premature. So I really don't have -- we really don't have a position on that right now other than the fact that we have a very nice label with INGREZZA and tardive dyskinesia.

On your first question, once you said competitive dynamics, I apologize again, you cut out for a moment there, so you were talking about TD and the competitive dynamic.

How did you end that first question?.

Just wondering if you could speak to the balance between overall market growth versus share growth within the market that you're seeing?.

Go ahead, Eric..

Yes. Hey, Brian. So, with regards to competitive dynamics, obviously, we're very bullish on the TD market opportunity. It's a -- as yet mostly undeveloped opportunity here, most patients today still remain undiagnozed and untreated.

And so our efforts are primarily focused on helping providers to recognize, make the appropriate and correct diagnosis for TD and then of course, INGREZZA is the most preferred and most prescribed VMAT2 inhibitor for TD. And so, we have the majority of market share.

In fact, just looking at the reported sales for brands VMAT2s over the last four quarters, the market share has remained stable.

So, we continue to invest in developing the market opportunity, as I mentioned, the expanded sales force, the unbranded awareness campaign for TD, but the majority of our focus is really helping patients that are currently undiagnosed to have that conversation with the provider and determine whether or not it's TD and then of course, whether or not they're going to get treated.

When they do, most of the time, INGREZZA is the choice. So, I hope that answers your question about competitive dynamics. But we feel very good that there is still a lot of opportunity for our product in this market..

That's really helpful. Thanks, Eric. Thanks, Kevin, and congrats again on the nice quarter..

We'll take our next question from David Amsellem with Piper Jaffray. Please go ahead. Your line is open..

So, I wanted to come back to contracting in INGREZZA and this is a long-term question, but as the footprint of the product grows and the footprint of ascites grows, do you start to think about contracting differently or just as the footprint grows in dollars, does that necessitate discussions with payers regarding contracting over the long-term? So that's number one.

And then another commercial question, and this is on opicapone and I apologize if you alluded to this earlier, but can you give us some color on your payer strategy there? And I guess specifically, how aggressively you're going to need to contract and how restrictive or not restrictive the payer landscape maybe for that product? Thanks..

Hey, David, again, you cut out at the beginning of your second question.

Was that one about opicapone and payer contracting?.

It was and the question, I'll just repeat a real quick.

The question was, your thoughts on the payer landscape for opicapone and the extent to which that landscape will be restrictive or not?.

Yes. So, I'll jump real quickly and briefly on the second question, which was opicapone again, little early to be discussing the payer landscape. I think there is a fundamental difference that will be with from opicapone from INGREZZA is that we don't plan on moving or having a price that would put us in the specialty tier or category with opicapone.

So it's going to be a different dynamic there, and I'll leave it at that.

Eric, do you want to talk about the first?.

Yes, David. So the answer to your question is, does the contracting or the payer strategy evolve, as we move through the launch? And the answer is definitely, yes. What we had said at the time of the launch and subsequently in 2017 and 2018 was that it was a little bit early for us to engage in contracting discussions with payers.

We wanted to better understand what the emerging payer mix was going to look like for INGREZZA, I think payers wanted to better understand what the volume was going to look like for this class, as well as through use of prior authorizations and so on, who are the patients getting treated, who are the providers that were providing the prescriptions and was our medication being prescribed appropriately? Now we're 2.5 years into the launch, and as you alluded to, INGREZZA is becoming a much more prominent medication.

And beginning of this year, I commented that we're at the point where we're starting to engage with plans in terms of looking at formulary additions and so on. Whereas at the beginning of the launch is a little bit too early for that kind of engagement with plans.

We're at the point now where we have started to engage with plans and we have started to contract selectively, where we make -- where we think it makes sense to benefit patient access.

So, this is a long time horizon, we want to make sure that we're sort of balancing our gross to net with the desire and the frankly the imperative to make sure that patients have affordable access to INGREZZA, and so we'll continue to look at these opportunities on a plant-by-plant basis, and invest where we think it makes sense.

But overall, we've been very successful through the launch and we aim to continue to have that success going forward..

We'll take our next question from Evan Seigerman with Credit Suisse. Please go ahead. Your line is open..

Thank you so much for taking the question, and congrats on the quarter. One for Matt, just can you help us think or quantify any inventory build we saw in 3Q? And what we should think about in 4Q? And then, I have a follow-up for Eiry..

Sorry, Evan, could you repeat that first question?.

Yes, sorry about that. The phones are not working today. My question was on inventory build in 3Q and 4Q.

Any color or quantification you can provide to us?.

Yes. So in Q3, nothing that I would flag as you know, in the second quarter, we did call out an incremental build that have occurred that caused our days on hand to go up. Nothing that I would call out being material in Q3.

As you think about Q4, I think some of the economics associated with INGREZZA make it difficult for there to be a massive stocking for example or any pull ahead of prescriptions by patients. So, not something that I would specifically call out.

And you had second question for Eiry, which we didn't catch?.

I did, I did. I don't think I asked it. So for Eiry.

So on the Parkinson's gene therapy program, can you just help us better understand just the rationale of using a gene therapy with this complex procedure for these patients for what seems to be more supportive treatment versus something that's purely disease-modifying? Or do you actually view this as disease modifying? And when should we expect updates on both the Parkinson's and the FA program?.

Thanks very much for that, Evan. So, as you know, there are one million patients in the United States with Parkinson's disease and six million patients worldwide. So it's the second most common neurodegenerative disorder.

And although there are a lot of therapeutics orally available, there is still huge unmet medical need, as evidenced by the fact that when patients progress through disease and get to that stage of motor fluctuations, it's a continuing decline and their ability to respond to levodopa/carbidopa treatment changes over time, and becomes less predictable and becomes more problematic.

And so the goal of the VY-AADC program is to replace in the brain of patients with Parkinson's disease experiencing motor fluctuations, a critical enzyme that results in the production of more dopamine in a more realistic and systematic fashion-right in the place where it's needed.

And so it is actually a very clever approach to treatment of the disorder and one in which we anticipate that it enable people to have a significantly better control of their disease in assessing that is problematic at the very least now for patients in terms of managing with oral treatment.

In terms of the update on where we are with the program, we continue to progress the RESTORE-1 study, which is our hopefully pivotal Phase II study for treatment of Parkinson's disease, patients with motor fluctuations and we are in the process, as I mentioned earlier of interacting with the FDA to get feedback on the overall program moving forward..

We'll take our next question from Marc Goodman with SVB. Please go ahead. Your line is open..

Yes, hi. I was curious about your latest meeting with AbbVie regarding ORILISSA and what they're saying about the product right now? And second of all, I may have missed this, but can you just comment again on R&D and why it was a little light in the quarter? Thanks..

Mat, you want to take the second part of that?.

Yes, sure. Marc, if you look back to last quarter, we did have a milestone that we paid to be out, that was $10 million, that caused the step-up in our R&D expenses.

I think if you want to look forward to 2020, it's going to be a year of significant investment behind many of our R&D programs between the CAH global registrational program as well as the Huntington's disease trial, that's going to add to our R&D investment.

In addition, as you've heard Eiry talk and speak about between our VY-AADC program or Friedreich's ataxia and the other two programs at Voyager, we would expect that to also be increasing as those programs evolve.

And then last but not least on the R&D front is, we continue to invest in our overall R&D structure -- infrastructure to support a platform to be able to put one to two compounds into the clinic per year. That's our goal and our target.

So you will see 2020 being an investment year on the R&D front, but in this quarter in particular, I would just say the deviation down was largely just because of the milestone that had been in R&D last quarter..

And so Marc, when it comes to ORILISSA, and our meetings with AbbVie.

AbbVie acknowledges that the launch is going slower than what they had anticipated but they continue to believe that our ORILISSA will ultimately be a very significant product for them, they are in still the early stage of market creation for that and what they're doing is that they're looking at all the barriers that exist for adoption and then they're adjusting their marketing efforts right now.

So in addition to DTC to create a broad market awareness, they’re looking at certain new marketing programs to better contextualize the ORILISSA profile and differentiate for both HCP's and patients.

So their goal is to drive a higher degree of urgency, as you can imagine, and over the past several decades, there has been a real resignation on the patient side and complacency, quite honestly, on the physician side, so that is what they put additional efforts behind, but they remain very dedicated to this, evidenced by the submission of the U.S.

NDA, and also starting the polycystic ovarian syndrome studies..

We'll take our next question from Yatin Suneja with Guggenheim Partners. Please go ahead. Your line is open..

Congrats on the quarter and thanks for squeezing me in. The question is more on the long-term business trend. Could you maybe comment on the rate you might be able to grow the business going forward on a yearly basis without having new indication.

If you look at 2018, 2019, it seems like you are adding about $300 million on the incremental sales basis, is that a healthy run rate that you could sort of grow the business going forward?.

Yes, sure. We're quite enthused around the long-term opportunity around INGREZZA.

If you think about 2019, this was a tremendous year for us in helping many patients get on a medicine like INGREZZA and help them with their movements and that was really on the backs of significant investment behind our sales force expansion, and then also the disease state awareness campaign.

So this year was a tremendous year and as we get into 2020, we'll provide you specific color as to what we had expected in 2020, either qualitatively or quantitatively, but just now as a company and as an organization, our number one priority is to continue to invest in INGREZZA and continue to develop the tardive dyskinesia market brand..

And what I would add to this, as I go back to if it's first principles, I don't know if that's the best term to use with this, but as we've said using kind of in precise numbers, we think that now there is maybe between 10% and 12% of TD patients have received the diagnosis and still only a fraction of them that are being treated for tardive dyskinesia.

So there is still a real long runway ahead of us. And so I'm not saying that's just going to be a smooth line that just keeps going up, but what I'm saying is, it's probably going to have punctuation, where we will have more and more adoption of the drug. So, and in addition, as we move forward, we plan on being a global pharmaceutical company.

We have VMAT2 follow-on programs. We've got the Huntington's indication that we're going into, and we also just have a real commitment to the VMAT2 franchise. So I think all those things together is going to lead to good sustained increasing growth in the future..

Just a quick one for Matt. Could you comment on the tax rate going forward? Is that something you're going to start paying on a regular basis? Thank you..

Yes. So we entered the year with about $1 billion in federal NOLs. So it's going to be quite some time before we get into a cash tax status with the federal government. And then on the state level, we do have state NOLs, but those are specifically earmarked in California.

So we will be a state tax payer here and that's what you see running through our P&L.

From a longer-term perspective based upon what we know today, we would expect our effective tax rate to be around 24% or so, but as our tax strategy evolves -- and that's a domestic number, but as our tax strategy evolves and we continue to mature into profitability, we'll provide incremental color in the future..

I'll now turn the program back over to our CEO, Kevin Gorman for any closing comments..

Yes. Thank you, and I really appreciate everyone's patience throughout this call. I know it's -- with cutting in and out on year-end and actually, apparently specific to us, we were only catching bits and pieces of some of the questions. I'm sure it's been frustrating to all of you. But thank you for bearing with us.

What I'd like to close with is that we remain and I hope that you realize this through this call and all of our interactions singularly focused on bringing important new medicines to patients not just today, but well into the future.

I look at us in just the near-term and if we look at the same time next year, we hope to have three medicines approved and four patient populations. Behind that, we'll have three pivotal programs under way.

And then behind that, we'll have our organic internal programs moving forward, already the partnerships that we have those moving forward and then yet to be identified business development opportunities that I hope to come through over the coming years that will add to that pipeline.

So we're dedicated to be the leading neuroscience company focused on the intersection of neuropsychiatric and neuroendocrinology now and in the future. And so, once again, thank you for your patience. I look forward to meeting up with all of you in upcoming meetings. Take care..

This does conclude today’s program. Thank you very much for your participation. And you may now disconnect..