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Operator: Good day, everyone, and welcome to today’s Neurocrine Biosciences Reports Fourth Quarter and Year End Results. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. . Please note this call may be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the call over to Todd Tushla, Vice President of Investor Relations. Please go ahead.

Todd Tushla: Thank you, and a good Monday morning to everyone. Welcome to Neurocrine’s fourth quarter and full year 2022 earnings call. I’m joined by Kevin Gorman, our Chief Executive Officer; Matt Abernethy, our Chief Financial Officer; Eiry Roberts, our Chief Medical Officer; Eric Benevich, our Chief Commercial Officer; and Kyle Gano, our Chief Business Development and Strategy Officer. During this call, we will be making forward-looking statements. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to review the risk factors discussed in our latest SEC filings. We will be jumping into Q&A after prepared remarks and as is customary, we will do our best to get to all of your questions. With that, I’ll turn things over to Kevin.

Kevin Gorman: Thanks, Todd, and good morning. Over the last several years, we have launched a number of initiatives to bring INGREZZA to TD patients and relieve their suffering. Now many of those initiatives have been very successful as evidenced most recently by the growth of INGREZZA in 2022 as we announced this morning. We’re going to continue to build on those efforts and anticipate continued meaningful growth in 2023 out into the foreseeable future. Now the initiatives that are most obvious to you are the expansion of our sales force and our direct-to-consumer advertising. What is less obvious but very important are all the other teams within the company that are force multipliers in making sure TD sufferers are appropriately treated.

Many of these efforts are aimed at educating healthcare professionals, their staff, payers and their medical advisers and importantly, for the first time, patients have groups advocating for the disease and their care. Again, these efforts have yielded significant results for sufferers of TD to date, and we will continue that momentum because the vast majority remains undiagnosed and untreated. Switching gears, we have a deep and diversified portfolio of mid and late-stage medicines that will have important readouts this year and into 2024. We’ve invested meaningfully in our research and development such that multiple new molecules will enter the clinic each year on a consistent basis to ensure a product flow into the future. I’ll stop there.

And with that, turn it over to Matt.

Matt Abernethy: Thank you, Kevin. Good morning. Good to see many of you over the past month. With INGREZZA sales growth of over $350 million in 2022, a record number of TD patients helped and in advancing pipeline, Neurocrine is in an excellent position for years to come. On the clinical side, CAH enrollment accelerated during the fourth quarter, enabling us to provide top line data in the second half of this year. On the financial front, our balance sheet strengthened in 2022, ending the year with over $1.2 billion in cash while using $280 million to retire a large portion of our convertible debt. For 2023, we expect another strong growth year for INGREZZA with sales of between $1.67 billion to $1.77 billion, reflecting an underdeveloped TD market supported by an expanded sales force and ongoing marketing initiatives.

For SG&A and R&D expenses, we intend to invest just over $1.4 billion in 2023, reflecting an overall increase in R&D spending, primarily related to advancing our 12 mid to late-stage clinical programs, including our muscarinic franchise as well as expanded preclinical research efforts. Specific to 2023 SG&A expense, while our investment in INGREZZA will increase to support continued TD growth in the hopeful indication in Huntington’s, we do expect to show SG&A leverage of around 300 basis points. I look forward to your questions later in the call. Now over to Eric.

Eric Benevich: Thanks, Matt. INGREZZA’s strong performance in 2022 was exemplified by four quarters in a row with year-over-year growth exceeding 30%. Our commercial and medical affairs teams really executed well to help more tardive dyskinesia patients get treated than ever before, and we carry this momentum into 2023. Yet much work remains ahead of us. Seven out of 10 of the approximately 600,000 people in the U.S. living with TD still have not been diagnosed. And half the time, those that receive a diagnosis aren’t offered first-line standard of care treatment with a VMAT2 inhibitor. So the opportunity for organic growth for INGREZZA remains significant. Our 2023 revenue guidance range of $1.67 billion to $1.77 billion assumes approximately 20% year-over-year growth at the midpoint.

The low end is a conservative estimate and contemplates pre-recessionary pressure in the U.S., while the high end reflects less macro headwinds and accelerated new patient growth. You should anticipate the majority of growth in 2023 to be driven by our psychiatry and neurology business segments, which are the relatively more developed segments of our business. Long-term care is a completely new site of care for INGREZZA, and we are just getting off the ground there. Our long-term care team has been making great strides getting up to speed on the unique and complex operational dynamics within LTC and how that impacts TD care. While we estimate somewhere in the range of 10% to 15% of TD patients are in an LTC setting, it will likely take a few more quarters before we see a tangible impact to overall sales given the relatively smaller size and higher complexity of that business environment.

On the patient activation front, last year’s direct-to-consumer campaign exceeded our expected internal metrics. So we will continue with that investment in 2023. Our newest DTC campaign, which we refer to as impressions, is now on the air via broadcast, streaming and digital channels. The campaign highlights INGREZZA as the simple choice with proven efficacy and it’s the number one prescribed treatment for tardive dyskinesia. All-in-all, we’re well poised for growth in 2023 and beyond. With that, I will turn the call over now to my colleague, Dr. Eiry Roberts, to discuss our clinical progress. Eiry?

Eiry Roberts: Thank you, Eric, and good morning to everyone on the call. 2023 promises to be an important year for the Neurocrine pipeline with a number of milestones and data readouts, including the August 20 PDUFA date for valbenazine as a potential treatment option for patients with chorea associated with Huntington’s disease. We were very pleased with the safety and efficacy results from the KINECT-HD study and with data from the subsequent six-month follow up, which formed the basis of our supplemental New Drug Application that was accepted by the FDA in December of 2022. On the clinical front, I’m pleased to announce that enrollment is complete in both the adult and pediatric registrational studies of crinecerfont as the treatment of congenital adrenal hyperplasia.

These trials were designed with input from all key stakeholders, including clinical experts in the field, patients, advocacy groups and regulatory agencies in the U.S. and Europe. I’d like to congratulate everyone involved in the crinecerfont program for all their hard work in getting us to where we are today. This program will provide the largest trial data set ever generated in patients with CAH. And we look forward to sharing top line results from both studies in the second half of this year. In addition to crinecerfont, we anticipate reporting studies from two Phase 2 proof-of-concept studies, NBI-352 for the treatment of focal onset seizure in adults and NBI-846 as a treatment for anhedonia associated with major depressive disorder. Both these top line data sets are expected in the second half of 2023.

Turning to our growing muscarinic portfolio, the team continues to make very good progress with enrollment in the Phase 2 study of NBI-568, a selective M4 agonist for the treatment of schizophrenia. We also remain on track to initiate a Phase 1 study of a dual M1/M4 agonist from this platform, NBI-570, later this year. To complement this robust pipeline in Phase 2 and 3, we plan to continue the growth of our early-stage pipeline by advancing additional new chemical entities into Phase 1 this year. I’m very pleased with the current robustness of our clinical pipeline and look forward to further strengthening this pipeline in partnership with our Chief Scientific Officer, Jude Onyia. Under Jude’s leadership of research and preclinical development, we’re investing in a range of modalities, including small molecules, peptides, proteins and gene therapy to deliver on the goal of providing symptomatic disease modifying and curative treatments for patients living with serious diseases in the field of neuroscience.

As I reflect on where we are as an R&D organization, the foundation and the opportunity for our pipeline has never been stronger. With that, I’ll turn the call back to Kevin. Kevin?

Kevin Gorman: Thank you, Eiry. And with that, I will open it up for questions.

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Operator: . We’ll take our first question from Paul Matteis with Stifel. Please go ahead.

Paul Matteis: Hi. Thanks so much and congrats on the quarter. I just wanted to ask about the assumptions embedded in your guidance this year. By our back of the envelope math, it seems like the high end of guidance could be met with fewer net patient adds on INGREZZA in 2022. Is that accurate? And maybe you can comment on that? And then just a quick aside, what does your guidance assume for your expectations for 1Q seasonality relative to prior years? Thanks so much.

Matt Abernethy: Yes. On the new patient front, we do expect to have a very great year here in 2023, over $300 million of year-over-year growth. And I’d say the top end of the guidance range does reflect acceleration in new patients, however, with a bigger base of patients. Keeping at a similar attrition rate, you do have a little bit of pressure on what the net new patient adds are. But we overall expect very strong growth year here in 2023. And as it relates to Q1, Q1 is always Q1. Patients delay their first fill as they go through the reauthorization process, and we typically have a higher gross to net. Our main mission is to make sure patients stay on medicine, and we’ve been very successful at that over the past five years. And I think that what you see is a little bit slower Q1, a nice recovery in Q2, and that’s going to lead to a great year here in 2023.

Paul Matteis: Thanks, Matt.

Operator: We will go next to Neena Bitritto-Garg with Citi. Please go ahead.

Neena Bitritto-Garg: Hi, guys. Thanks for taking my questions. So just another question on INGREZZA. For 4Q, I think backing into the gross to net discount based off of the growth metrics that you provided on volume for the quarter, it seems like the net price per script was a little bit higher than I think what you had guided to. So I’m getting somewhere in the mid 5,600 per script range. Can you just verify if that’s correct? And then also how we should think about the net price in 2023, if we should still expect about 5,600 a script? Thanks.

Matt Abernethy: Yes. Net revenue per script in Q4 was in the 5,400 range, and you should expect that to be fairly consistent sequentially when you think about Q1. But year-over-year, as it relates to 2023, you should expect a net price increase of between 3% to 4%. That puts you at a place of $5,600 net revenue per script. So that’s correct, Neena.

Neena Bitritto-Garg: Got it. Thank you. That’s helpful.

Operator: And we’ll take our next question from Tazeen Ahmad with Bank of America. Please go ahead.

Tazeen Ahmad: Hi, guys. Good morning. Thanks for taking my questions. Just one from me on I guess President Biden declaring that COVID is officially over May 11. How does that if in any way affect the way that I guess like psychiatrist has been getting paid with regards to telemedicine? And then maybe just a quick follow up after that. Thanks.

Kevin Gorman: Hi, Tazeen. Good morning. Actually, with the — what we do know already is that the telemedicine mandates that are in from the emergency health order are going to last for two years post the emergency health orders expiration. And I think the emergency health order is supposed to expire in May. And so you can bet that it’s been kicked down the road for about two years post May. So we don’t see any changes certainly in ’23. And hopefully, we’ll know more as we go into ’24.

Tazeen Ahmad: Okay. Without that, if it does go back to in-office, would that provide you with more certainty on the upside if doctors have to go back into the office?

Kevin Gorman: Our upside did not take into account any changes in the number of physicians back into the office or any changes that have to do with the emergency health order in telemedicine.

Tazeen Ahmad: Okay. Thanks, Kevin.

Operator: And we’ll take our next question from Brian Skorney with Baird. Please go ahead.

Brian Skorney: Hi. Good morning, everyone. Thank you for taking my question. I was hoping maybe you could walk through some of your internal assumptions around the market opportunity in CAH, given the Phase 3 data reading out the latter half of this year. I know a number of years ago, you did a Commercial Day discussing this market when you had an earlier iteration of programs. It does seem like investor expectations around commercial here are somewhat muted compared to your neuro program. So just hoping to kind of get a light out of how you currently think about what the commercial can look like here?

Eric Benevich: Good morning. So let me preface this by saying that, of course, we still have crinecerfont in the clinic. It’s an investigational medicine not approved yet for the treatment of CAH. But certainly, we’re excited about the opportunity that it presents. Just taking a step back, in the U.S. there is somewhere between 20,000 and 30,000 people living with congenital adrenal hyperplasia, a similar number in Europe as well. Standard of care today is essentially glucocorticoids that are required to essentially replace the missing cortisol for these patients. What crinecerfont is intended to do and what we hope to see in the clinical trial is not only improvement of day-to-day control of the patient’s androgens but also the opportunity to potentially reduce the dose of the steroids that they’re taking for their entire lives.

And so we certainly see this as a significant game changer in terms of the standard of care. And there are no new treatments for CAH for decades. So really what it bodes down to is let’s see what the data look like. We’re excited about the opportunity, and there’s a significant unmet need in terms of being able to help these patients, improve their day-to-day disease management and overall reduce the potential for long-term issues from treatment with steroids. Eiry, do you have anything to add?

Eiry Roberts: No, I think the only thing I’d add is, obviously, if you think about the unmet need in — for patients in CAH, as Eric mentioned, there’s been no new treatments that were non-steroidal in nature ever actually in this disease area. And given that our program includes both a pediatric study and adult study, it gives us an opportunity to really understand how to serve this patient population right through from early years of childhood through adulthood. And I think we’re really excited about that opportunity and look forward to reading out the data later this year.

Brian Skorney: Great. Thank you.

Operator: And we’ll take our next question from Phil Nadeau with Cowen & Company. Please go ahead.

Phil Nadeau: Good morning and thanks for taking our question. It’s a follow-on to Brian’s about the CAH trials. The primary endpoint in the adult trial is change in glucocorticoid dose while the primary in the pediatrics is change in serum A4. Can you remind us why you chose two different endpoints for the two different studies? And then also what the powering of the two trials are and what would be considered clinically meaningful changes in those endpoints? Thank you.

Eiry Roberts: Yes. Thanks very much. It’s Eiry here. So both of those endpoints that you alluded to, both the androgen reduction itself and the steroid dose, are very important to patients with CAH. And so both of the data sets will be important as we read out the information from both the pediatric and adult trials. And so we will be looking at the data holistically across all of the information. And we’ll be interested as well in clinical outcomes that are embedded as important secondaries into the trials. The reason for choosing the difference is in the endpoints and having the androgen level predominantly being the primary for the pediatric study is really based on how pediatric patients are managed in terms of their care and also the significant variability that you see in pediatric patients associated with some of the physiologic changes that are happening in that patient population anyway such as growth development and other important things.

And so in terms — also then getting to the second part of your question around powering and steroid reduction for each of the trials, if you take the pediatric trial first, from our adolescent and adult proof-of-concept study, we saw a significant reduction in androgen levels after just 14 days of treatment with crinecerfont. And so given the 81-patient trial that we have in pediatrics, we’re significantly overpowered to see a change in the androgen levels as a primary for that study. And so the number of patients in the trial is more to address safety, tolerability and also to give us a better insight into the steroid reduction secondary. The same is actually true for the adult study. 165 patients in the adult study we believe is highly powered to address the steroid reduction endpoint.

And if you remember, the steroid reduction endpoint is a change from baseline in the GC dose comparing the treated to placebo. We know from a lot of our discussions with key stakeholders that long-term steroid treatment, particularly at super physiologic levels, is detrimental for patients. And so any reduction in steroids that we see during the program we believe will be important for patients in the long run.

Phil Nadeau: That’s very helpful. Thank you.

Operator: And we’ll take our next question from Chris Shibutani with Goldman Sachs. Please go ahead.

Chris Shibutani: Thank you. Good morning. For the schizophrenia targeted indications that you have different mechanisms of complicated disease, can you talk about how you’re feeling about the portfolio? And Eiry, if you could perhaps share where you think there might be some edge of positioning or probability of success with your pipeline assets?

Eiry Roberts: Yes, happy to do that, Chris. So we have three main assets in clinical development right now for the treatment of schizophrenia, and they all actually focus on several different aspects of schizophrenia as a disorder. If you take the furthest along, our Phase 3 program for valbenazine as an adjunctive treatment for schizophrenia, we have two studies going on as registration studies addressing that disorder right now. We’re very interested in that area because schizophrenia, obviously, is one of the major disabling neuropsychiatric disorders around the world and 3.5 million people at least in the U.S. impacted. And what we know about schizophrenia is it’s a neurodevelopmental disorder that happens and starts early in life and the majority of patients do not receive full benefit from currently available therapies such as the antipsychotics.

What we’ve seen from valbenazine in the tardive dyskinesia space is that the combination of antipsychotics and valbenazine is very safe and well tolerated in patients with schizophrenia. And coupling that with some preclinical information that showed synergy of effect in this patient population and also anecdotal data from the field that made us confident to go into a program that would allow us to understand whether patients with schizophrenia who are failing to get maximum response from their current treatment could actually benefit further in terms of both their positive and potentially negative symptoms by the addition of valbenazine. The second therapy that we have is luvadaxistat, which is in Phase 2 development. That is a DAAO inhibitor, comes from our Takeda collaboration, and that seeks to address the important cognitive deficit that is seen in patients with schizophrenia, particularly younger patients, given that this is a developmental disorder.

And so from that perspective, luvadaxistat, we had a signal in our Phase 2 study that was intriguing to us in terms of the impact on the Braxton scores measures. And so we believe that there is opportunity there that we want to further progress and further explore in Phase 2. And so we have a replicate study going on right now. And then the third and most recent addition to our pipeline is the M4 selective agonist 568, and we’re very excited about this opportunity to treat patients with acute psychosis. And we started a Phase 2 study with this mechanism late last year, and that is really enrolling very well. And as you know, this is now a validated mechanism for the treatment of acute psychosis through recent trials that have read out in Phase 2 and Phase 3.

So across the board, we think there’s a space for all of these different approaches since they each address a different aspect of schizophrenia. And given that this is a lifelong disorder for individuals from a young age right through their life, we do believe that there’s opportunity for these things to coexist if we’re successful in the clinical trials.

Chris Shibutani: Thank you.

Operator: And we’ll take our next question from Carter Gould with Barclays. Please go ahead.

Carter Gould: Good morning. Thank you for taking the questions. And I appreciate all the color on the long-term care segment. Maybe just to follow up there, can you maybe just give a little bit more detail on some of these operational hurdles and kind of Neurocrine’s efforts to kind of help the centers on that front? And just sort of what gives you confidence that’s surmountable in the next couple of quarters as you alluded to? Thank you.

Eric Benevich: Yes. As I mentioned on my initial commentary, LTC is a new segment for INGREZZA. However, it’s an opportunity that we’ve been looking at really since before we launched back in 2017. So we’re excited to be in a position where we’ve actually put a team in place to really explore that opportunity in LTC. We estimate that 10% to 15% of all TD patients are in an LTC setting. And I mentioned in my commentary that it is a more complex environment. And what I mean by that is that many of these care centers function on a day-to-day basis being run by nursing staff and the prescribers, whether it’s the medical directors, the consultant psychiatrists or nurse practitioner, they rotate through. So they’re not there on a 24/7 basis.

They’re coming through maybe every other week or every third week. And so really what that requires is for our folks to work closely with the staff in these facilities to educate them on tardive dyskinesia, help them to recognize the abnormal movements, potentially distinguish them from other drug-induced movement disorders and importantly, identify and flag residents that need further evaluation from the MD or from the nurse practitioner. And so ultimately, it takes a team approach in long-term care, and you really need to understand that environment not only in terms of the dynamics within the facility and who their prescribers are, also the role of the LTC pharmacy. And so we’ve been building our understanding of where the opportunity is.

We’ve been narrowing the focus in terms of where we need to spend our time. And we’re seeing good I think initial results. And so we’re very pleased with the progress that we’re making in long-term care. But I do think that in the end, it’s still a new space for us and not as far along in terms of level of education and awareness of TD is what we’re seeing in psychiatry and neurology. But we’re excited about the opportunity, and we’re going to continue to make progress in 2023.

Operator: And we will go next to Myles Minter with William Blair. Please go ahead.

Myles Minter: Hi. Just back on the catalyst trial, the adult one specifically, just wondering whether these patients are well controlled in terms of their A4 levels on their current glucocorticoid dose, just curious about that given your expectations that you would see additional A4 reductions there. And if those patients are already controlled, how much emphasis we should put on that secondary endpoint? Thanks.

Eiry Roberts: Thanks, Myles. I think in general, patients with CAH are not well controlled. Intermittently, they have some degree of androgen control. But certainly, what we wanted was our trial to reflect the real world situation. And so it’s a requirement in the trial that patients not only have excess steroid dosing but also a lack of control of androgen. So I think there’s a real opportunity for us to demonstrate a benefit for patients in the context of these trials, both from an androgen control point of view, which is the direct action of crinecerfont and then from the ability to reduce the steroid dosing.

Operator: And we’ll take our next question from Brian Abrahams with RBC Capital Markets. Please go ahead.

Brian Abrahams: Hi. Good morning. Thanks for taking my question and congrats on another nice quarter. I have a question on the balance of sales growth versus investment. So you guys are guiding for roughly 300 million in year-over-year growth in INGREZZA at the midpoint, but only half of that or less in additional SG&A investment year-over-year. So I guess I’m wondering, is this the right way to be thinking about leverage going forward as you continue the successful direct-to-consumer campaign and push into long-term care facilities, or are there other factors to consider that could enable perhaps even greater operating leverage on INGREZZA commercial franchise going forward over time? Thanks.

Matt Abernethy: Yes. So I’d say first and foremost, we expect a tremendous amount of growth in INGREZZA here into the future. Seven out of 10 patients still have not been diagnosed, two have tardive dyskinesia. So you have to have a growing product to, of course, drive SG&A leverage. The second piece of investment this year is also preparing for the Huntington’s disease launch. So we do have investment associated with that. That is going to be leveraged in particular as you think about 2024 when the growth will more holistically kick in. So I don’t want to set up an exact algorithm for you in terms of how do you think about SG&A leverage, but our expectation is this year 300 basis points of leverage and we would continue to expect leverage as you look into even next year.

Brian Abrahams: It’s really helpful. Thank you.

Operator: We will take our next question from Jay Olson with Oppenheimer. Please go ahead.

Jay Olson: Thank you for the update and congrats on all the progress. Can you talk about the leadership role that Neurocrine played in the small biotech exception that was built into the IRA provision for Medicare price negotiations and the implications for INGREZZA as we think about a long-term life cycle management? Thank you.

Kevin Gorman: Yes, Jay, thank you. I think Neurocrine work really effectively with a number of partners, including bio and other organizations. And so while we think there’s a lot more work that needs to be done with the legislation that passes, the fact that the small manufacturer and small biotech exemptions in there are extremely helpful to companies like Neurocrine, and we’re going to continue our work along with others in order to work with CMS and to work with legislatures over the years as this is rolled out.

Jay Olson: Thank you.

Operator: And we will take our next question from Charles Duncan with Cantor Fitzgerald. Please go ahead.

Charles Duncan: Yes. Good morning. Kevin and team, congrats on a great quarter and thanks for taking our questions. I had two brief ones. One is valbenazine in Huntington’s chorea. I guess I’m wondering if you could remind us as to not really pricing but the pharmacoeconomic value of valbenazine versus Austedo. And what is, call it, target product profile that differentiates it, perhaps even relative in schizophrenia? And my second question is development. That is regarding 846, I’m wondering if you see that as an adjunctive treatment in depression or a monotherapy.

Eric Benevich: Good morning, Charles. It’s Erik. I’ll maybe just take the first part of your question. With regards to the value prop for valbenazine in Huntington’s chorea, obviously we’re excited about the opportunity there and we’re excited about the data that were generated in the HD study. We’re under review at the FDA, so it’s not approved for that use. As we mentioned earlier, we are preparing for the opportunity once we get the approval to promote this into the HD chorea population. And we’re well positioned for that given the fact that we already have extensive footprint in neurology, especially with movement disorder specialists. And so if you think about the HD chorea population, only about 20% of patients living with chorea formed movements are currently getting treated with the VMAT2 inhibitor.

And there are reasons for this. Obviously, some folks are turned off or not willing to accept complicated titration regimens or concerned about tolerability issues. And so we think that we’ve got a differentiated profile. We’re excited and looking forward to bringing valbenazine forward once we do get the green light from the FDA. Eiry?

Eiry Roberts: Yes. Thanks, Eric. So the only thing I’d add to what Eric said is that some of same differentiating characteristics that we see for valbenazine versus deutetrabenazine in tardive dyskinesia also hold true for Huntington’s disease and maybe even more importance there in terms of the simple lack of complex titration, the lack of food effect and the ability to not have some of the challenges of splitting capsules in patients with dysphagia. So I think there’s several differentiators there from an importance point of view for patients we’re very encouraged by. With respect to 846, we have a Phase 2 proof-of-concept study in anhedonia and depression going on right now, which we anticipate will read out at the end of this year.

Anhedonia is a really important symptom in depressed patients that is not addressed by currently available antidepressant therapies. And so there’s a huge opportunity there for patients to get treatment for their anhedonia element. It’s a bit early to tell whether this would be an adjunctive treatment or could have the possibility to be used as a treatment as a monotherapy. In the Phase 2 study, we are looking at the anhedonia scales in patients on current antidepressant treatment. But in addition, we will be looking as to whether there’s any direct antidepressant effect on normal depression scales, the MADRS as well. And so I think once we read out the data from this study, we’ll have a better understanding of the potential path forward.

Charles Duncan: Thank you.

Operator: We’ll take our next question from Laura Chico with Wedbush Securities. Please go ahead.

Laura Chico: Good morning. Thanks for taking the question. Just a quick one with respect to the diagnosed TD population that you’re estimating. Approximately 30% of TD patients are now diagnosed. I’m wondering if you could speak to the typical duration of treatment that you’re seeing among the diagnosed patients, how long are TD patients remaining on a VMAT2 inhibitor once they start? And just out of curiosity, how frequently are patients coming back to treatment? And just wondering what drivers might be contributing there? Thank you.

Eric Benevich: Going into this launch, certainly, we expected that compliance with INGREZZA would be similar to other medicines that these patients are taking for their underlying psychiatric illnesses, consistent with what you see, for example, with antidepressants or with antipsychotics. We’ve actually been very pleased with the persistency that we’ve seen subsequent to the launch better than what we expected. So certainly, that’s an important driver of growth and has been really since the early days of the launch and has continued all the way through Q4 of 2022. And so we don’t see any reason why that would change. It’s better than what we expected to see and certainly better than what we see with the psychiatric meds, but we haven’t given specific numbers in terms of what the actual persistency is with INGREZZA.

And then with regards to the overall patient population, we estimate it to be around 600,000 in the U.S. There are other estimates that are out there that are larger. However, if you look at the progress that we’ve made over the last five plus years since the launch, we started with an extremely under-diagnosed, under-coded patient population, only low single digit percent of people living with TD had actually been given the diagnosis that was in their medical record. Now we estimate that’s around 30%. So we feel good about the progress that we’ve made. However, there’s still a lot of work to do. Still seven out of 10 roughly patients living with TD have yet to be given the diagnosis or really any explanation for their abnormal movements. And about half the time when patients are diagnosed, they’re not offered treatment with a VMAT2 inhibitor, which is the new standard of care.

So we see a lot of opportunity for improvement and frankly, a lot of opportunity for organic growth with INGREZZA in the TD patient population. We feel good about the progress we’ve made, but we recognize that there’s a lot of work ahead of us. Thanks.

Laura Chico: Thank you.

Operator: We will take our next question from Anupam Rama with JPMorgan. Please go ahead.

Unidentified Analyst: Hi. Thanks for the question. This is actually on for Anupam. You had previously mentioned sales force pull-through expected around 3Q. What metrics are you seeing or tracking to best understand that? Thank you.

Kevin Gorman: Hi. What we look at is both leading and lagging indicators. And in our expansion of 2022, we hired experienced salespeople in neuroscience, both in psychiatry and in neurology. And so they come in with a lot of experience and relationships. What they don’t have is a direct experience in the TD market. And so that takes a little bit of time to learn. This kind of sales job I think is different than maybe selling an antidepressant or an antipsychotic, for example, in the sense that there’s a lot of disease education that occurs really across all these care settings. And we help our customers recognize TD, we educate them on the diagnostic criteria, we use a lot of videos to help them recognize different presentations of TD across different patient types.

And not only do they have to help our customers with the diagnostic process but certainly to appreciate the differences between treatment options and why INGREZZA is the most preferred treatment. Ultimately, we also have a fair bit of lift in terms of reimbursement support on the back end since this is a specialty product. And so what we’ve seen in the past when we’ve expanded our team is that it took a few quarters for the new salespeople to get up to the same level of proficiency as the legacy team, and we saw that this time around as well. Certainly, we believe that the expansion of our field organization contributed to the strong growth that we saw in 2022. However, we do believe that there’s still upside from that expansion that we’re going to see going forward.

Unidentified Analyst: Thank you.

Operator: We’ll take our next question from Marc Goodman with SVB Securities. Please go ahead.

Marc Goodman: Good morning. Eiry, can you talk about the epilepsy data that’s coming in the second half of the year and how you look at this product as a potential differentiator in the epilepsy market? And then, Matt, can you maybe help us just a little with expenses, just maybe anything unusual how they’ll be spread throughout the year and just update us on tax rate and how you’re thinking about that this year and the next couple of years? Thanks.

Eiry Roberts: Okay. Thanks, Marc. So the epilepsy study that we have ongoing right now in Phase 2 for our molecule 352, which is a selective Nav1.6 channel antagonist, it’s a focal onset seizure study. Focal onset seizures are the most common seizures seen across the kind of different types of epilepsy. This is an adjunctive trial in that patients are already being treated with somewhere between one and four antiepileptic agents, but still have a baseline seizure frequency that shows a lack of control from their current treatment. The endpoint for the study is the 100 patients. The endpoint is a change from baseline in the seizure frequency measured over kind of a month’s baseline period and then compared to the last month of treatment and the overall treatment period is up to 13 weeks.

In terms of the differentiation, if we think about the 352 as a selective Nav1.6 antagonist, the majority of currently available antiepileptic therapies have broad pharmacology associated with somewhat unfavorable benefit risk profile. And so the — our intent here is to understand whether antagonizing what is probably the most important of the sodium channels in epilepsy and doing that alone gives us the efficacy at a lower and appropriate dose without some of the tolerability and side effects that are seen with currently available treatments. Obviously, this is a Phase 2 study. We’re on track to read out the data in the second half of this year. And based on what we see there, we’ll be considering next steps if we’re successful.

Matt Abernethy: So real quick on the spending front. The only item that I would call out from a timing or seasonality perspective is we’ve historically seen a big step up in spending in the first quarter, and that’s just associated with specific items that we incur during the first quarter of each year. So I’d encourage you to look back and see what the step ups have been. Historically, a much larger concentration of spending will occur during the first quarter. From a tax perspective this year, I’m expecting an effective tax rate of between 24% and 25%. On the cash tax side, we burned through all of our NOLs in 2022 as a result of the tax legislation associated with capitalized R&D. And so as a result of that, we will be a federal cash tax payer here in 2023.

Still holding out some level of hope that that might be put on hold in terms of the capitalized R&D tax legislation. But for now, what I would guide you to is that we would be expecting to be a full federal cash taxpayer this year.

Marc Goodman: Thanks.

Operator: We will take our next question from Ash Verma with UBS. Please go ahead.

Ashwani Verma: Hi. Thanks for taking my question. Congrats on the quarter. So for the 568 muscarinic Phase 2 trial that you have, you previously said that it’s a dose finding study. Can you share if it’s a once-daily or twice-daily molecule? And from your perspective, how much would dosing frequency matter for competitive differentiation?

Eiry Roberts: Yes, I think — thanks for the question, Ash. We haven’t shared very much information in detail about our program. You’re correct. It is a dose finding study. It’s an adaptive study of up to 200 patients which started towards the end of last year in patients with acute schizophrenia — acute psychosis. The enrollment in that program is going extremely well right now, and we’re looking forward very much to seeing both the impact of this M4 selective agonist on the symptoms of psychosis and also obviously importantly this safety and tolerability profile.

Ashwani Verma: Thanks.

Operator: And we’ll take our next question from David Amsellem with Piper Sandler. Please go ahead.

David Amsellem: Thanks. So on the muscarinic portfolio, you’re building the selective M4. 568 is offering the potential for an improved safety profile. So I guess with that in mind, I’m wondering if you could better articulate how you’re thinking of the value proposition of the dual M1/M4 and what kind of role that would play as you think about pipeline and from a competitive perspective? And then secondly, as you think of the portfolio here, what’s your view on the potential beyond schizophrenia, particularly for the muscarinic and mood disorders, say, bipolar mania and how are you thinking about development there? Thank you.

Eiry Roberts: There’s a lot of questions in there. Thank you. So we are very excited about the portfolio of assets that came to us from the collaboration with Sosei Heptares. And I think that’s one of the real strengths of this collaboration in our mind. Clearly, the M4 agonism is a validated mechanism in the treatment of acute psychosis. I think that’s been confirmed both in Phase 3 and Phase 2 clinical trials now. But through mechanisms different from direct agonism, you have obviously the pan agonist as a normal combination and then you also have the positive allosteric modulator, which requires the presence of acetal cooling to be effective. And so in the context of the M4 selective agonist, it’s really early to be able to make a statement around differentiation around safety.

Our trial in Phase 2 is designed to give us an initial estimate of benefit risk and the safety and tolerability. And so I think when we read the data from that study, we’ll be able to have a much better understanding of how we might differentiate from a tolerability and safety point of view. And then in terms of the broader activity with the M1/M4 dual agonist, beyond schizophrenia, we believe there is a significant degree of opportunity for this platform in diseases impacting cognition all the way through from Alzheimer’s to neuropsychiatric disorders that are impacted with deficits in cognition. And in addition, I think your commentary around bipolar also makes sense in terms of the mechanism of action here.

Kevin Gorman: And so the only thing I would add is that we have been in — had a very deep research program in the muscarinics all of them for the last several years. And with that, coupled with our collaboration with Sosei Heptares, positions us uniquely out there in the muscarinic world in that we can test the hypothesis in man with a number of specific compounds, an M4 specific agonist, an M1/M4 and an M1. And so we’ll be able to tease out and elucidate exactly the pathways that are involved here and be able to choose the right compound, the right mechanism for the right disease.

Operator: We will take our next question from Evan Seigerman with BMO. Please go ahead.

Evan Seigerman: Hi, guys. Thank you for taking my question. I would love to know some of the puts and takes of tardive dyskinesia in the long-term care setting. This could be a significant driver just given population dynamics. I guess kind of, one, what is the plan for reaching these patients to providers or patients, assuming that DTC is probably not in the question here — or out of the question here? Thank you.

Eric Benevich: Thanks for your question. And certainly, I agree that this is an exciting opportunity for us that we’ve been looking forward to really for years. So how do you create leverage within LTC? As I mentioned before, these are facilities that are essentially run by nursing staff 24/7 with providers that rotate through, whether it’s the medical directors, the consultant psychiatrists, the nurse practitioner, the consultant pharmacists. And our team really has worked to understand what are the dynamics locally in terms of these facilities, who are the facilities that the providers are rotating through, what’s the relationship with the LTC pharmacies? And this kind of building what I would call an outside-in account management approach so that you can work with a number of providers, but really affect a much larger number of facilities.

Obviously, we do a lot of education. We go in and do in-service programs for the nursing staff and for the entire care team really in those facilities to help them to recognize TD movements, flag those residents, and bring them to the attention of the providers so they can do a full differential diagnosis. And so it’s a team approach. It’s a more complicated environment than what you see in most outpatient clinics. And in some ways, it’s more similar to what you might see, for example, in a hospital environment in terms of how you need to sort of manage those accounts. So we’re excited about the opportunity. We are seeing good progress there. It’s not nearly as developed, as I mentioned earlier, as the psychiatry and neurology business segments.

And that’s because essentially, this is just getting off the ground for us with INGREZZA. And so in some ways, 2023 in LTC is akin to 2017 for what our launch was like in psychiatry and neurology. So we feel good about the progress we’re making, and you’ll hear more about that as we move through the year.

Evan Seigerman: Great. Thanks.

Operator: And we’ll take our next question from Ami Fadia with Needham. Please go ahead.

Ami Fadia: Hi. Good morning. Thanks for taking my question. Can you talk a little bit about the Huntington’s disease chorea? With the awareness that physicians have with INGREZZA in TD, how do we think about the ramp of the launch in that indication, if you could talk about that? And in CAH, separately, can you talk about kind of where the patients are treated? And if there are differences then, how and where patients are treated in Europe as opposed to the U.S.? Thank you.

Eiry Roberts: I’ll take the second one first, Ami. Thank you for that. I think it’s pretty consistent in how patients with CAH are treated. It’s usually in our experience in expert endocrinology clinics. These clinicians know their patients well. We certainly don’t have an issue of diagnosis here. And I think we have seen a lot of similarity as we’ve run these global trials.

Eric Benevich: Yes. With regards to the first part of your question about the dynamics within the Huntington’s community, I’ll start off by saying that we’re excited about the data that we’ve generated and certainly look forward to getting the labeling from the FDA later this year. We have complete coverage of the movement disorder neurology community with our existing neurology sales force. And obviously, we need to introduce the data and the label to those neurologists that are treating these Huntington’s patients. But this doesn’t require any kind of significant lift or change to our commercial footprint. So this is really another opportunity to create leverage with our existing infrastructure, and we’re excited to bring what we think will be a differentiated product to a population in need.

Operator: And we’ll take our next question from Yatin Suneja with Guggenheim Partners. Please go ahead.

Yatin Suneja: Hi, guys. Thank you for taking my question, a two-part question. First is, you have three major catalysts this year. You have the focal onset, CAH data and then the anhedonia and MDD data. Can you maybe articulate for us how you are thinking about these three distinct catalysts? Is there one where you have higher probability of success, especially on the focal onset and CAH where there is sort of more mechanistic rationale? And then if you can also talk about anhedonia, why do you think agonist might be more sensitive in these patients? And what should we anticipate on the endpoint that you are evaluating the endpoint that you are looking at in Phase 2? Thank you.

Kevin Gorman: Yatin, you asked a few dozen questions in there. We could probably spend the better part of the hour of this call in going through that. What I’m looking forward to is, as the year goes on, to be able to talk about each of these programs in greater depth. And as we get closer to data, obviously, we’re going to be speaking about them. So I’d like to basically put your questions on hold until we have a better forum where we can hit each one of them in detail.

Operator: We’ll take our next question from Sumant Kulkarni with Canaccord. Please go ahead.

Sumant Kulkarni: Good morning. Thanks for taking my question, which is in effect an expense management one. Given the timing of your recent new gene therapy collaboration with Voyager, are you thinking about your stake in Voyager as a longer term strategic one? Or does the timing of your transaction allow for some tactical moves that could allow you to defray some SG&A expense related to the — R&D expense related to GBA1-associated program in the near to midterm, especially if Novartis opts into its collaboration with Voyager in the current quarter?

Matt Abernethy: Yes. So from an expense management perspective, this wasn’t done for any type of expense management. There will be not a ton of burn here in 2023, but it really puts us in a position to have an expansive gene therapy preclinical portfolio that’s going to put us in a position to be able to — hopefully be able to have both disease-modifying curative medicines for patients when you look back 10 years from now. So very strategic in terms of what we’ve done here. And also on the financial front, we have plenty of financial flexibility here even post the upfront payment that we’ll be making. And so it allows us strategically to continue to make larger or different investments even outside of gene therapy as we look forward. Thank you.

Sumant Kulkarni: Thanks.

Operator: We’ll take our final question from Mohit Bansal with Wells Fargo. Please go ahead.

Mohit Bansal: Great. Thank you for squeezing me in. I have another question on crinecerfont. So when we talk to doctors, they all are excited about the profile of the drug and everything. But they said payers are going to be a little bit of a challenge. To that end, how do you foresee potential challenges there given that glucocorticosteroids are cheap, what can you do to help payers understand the profile of the drug? And is there a bar in terms of clinical efficacy that would basically move them over? Thank you.

Eric Benevich: Yes. So I’ll just comment quickly on the payer front. This is a disease area where we’re going to have to educate payers, similar to what we did with tardive dyskinesia. The thing that we’ll be emphasizing with payers is that these patients are often very poorly managed. The steroids are an important treatment that keep them alive. But most patients are either at any given point in time, either over treated or undertreated with their steroids. And therefore, their disease is not well controlled. And that’s really where the value story for crinecerfont comes in to improve that disease control and what we hope to demonstrate is to reduce the steroid burden. So we’re excited about the opportunity. Obviously, we need to see the data.

But we’ve got a plan, and the plan is not only to educate the provider and patient communities but also to work carefully with the payers so that they understand the value proposition of crinecerfont and where it fits in, in terms of the overall treatment landscape.

Mohit Bansal: Super helpful. Thanks.

Kevin Gorman: I want to thank you all for your questions. I have just a couple of final remarks here. First and foremost, we’re looking forward to a very strong 2023, which is evidenced by the guidance that we gave you for INGREZZA and looking forward to the potential of adding the HD, Huntington’s disease, to our label in August, which is our PDUFA date. The other thing is that, as you know, we’ve talked a lot over the years. And the goal of the company is to become the leading neuroscience company in the world. And we broadly talk about neuroscience as being neuroendocrinology, neurology and neuropsychiatry. It’s interesting if you look at the three data readouts that we have this year, CAH, FOS and anhedonia, they cover all three of those areas of neuroscience. And with that, again, I’d like to thank you for all the questions you had and look forward to getting together with you in the coming months. Take care.

Operator: Thank you. And this does conclude today’s program. Thank you for your participation. You may disconnect at any time.