Neurocrine Biosciences Inc

NASDAQ:NBIX

Earnings Call Transcript 2020-Q3

[Operator]

Good afternoon, everyone, and welcome to today's Neurocrine Biosciences Reports Third Quarter 2020 Results. At this time, all participants are in a listen-only mode. Later you will have an opportunity to ask questions during the question-and-answer session. (Operator Instruction) Please note this call may be recorded. I'll be standing by. Should you need assistance.

It is now my pleasure to turn today's program over to Todd Tushla, Vice President of Investor Relations. Please go ahead.

[Todd Tushla, Vice President, Investor Relations]

Great. Thanks, Jamie. Good afternoon everyone and thank you for joining our third quarter of 2020 earnings call. Joining me on the call is 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 today's call, 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. Following our prepared remarks we will open the call up for questions and ask that you please limit yourself to one question to give us many people as possible, an opportunity to participate.

With that I now turn the call over to Kevin Gorman.

[Kevin Gorman, Chief Executive Officer]

Thanks, Todd. Good afternoon everyone and thank you for joining us today. Matt, Eric, Eiry and I will be keeping our prepared remarks short to allow for the majority of the time for your questions. As you saw from our press release this past quarter, we experienced a fairly significant impact from the pandemic on our business. Psychiatric practices are more heavily influenced by COVID and then other specialties. In Q3, approximately 40% of psychiatry offices were not seeing patients in person and as you know, the majority of our call pattern has been to psychiatrists. This is a temporary situation and the medium and long-term outlook for INGREZZA is as robust as ever, if not more so. Now importantly INGREZZA return to its previous growth pattern is not solely dependent on the resolution of COVID.

We are investing in the development of new techniques to assist psychiatrists in making the identification and diagnosis of TD via telemedicine and this will ultimately grow the TD market. Now late in Q3, we launched ONGENTY, as an adjunctive treatment in Parkinson's disease. This has given our sales force enhanced time in the movement disorder neurologists offices at the very end of Q3 and into Q4. Neurologists have shown a great interest in ONGENTY and in addition, during these office visits, they learned more about INGREZZA as attractive profile treating TD. Now as we sit here today, we are encouraged by the growth of new patient starts on INGREZZA when we exited Q3 and in the first several weeks of Q4.

However, our enthusiasm, I think you'll agree is justified tempered with the rapid rise of COVID nationwide. Depending on the severity of COVID this winter Q4 underlying sales could look similar to Q3 due to the disproportionate impact of the pandemic has on psychiatrists behavior. We are meeting these short-term challenges and we will see restored growth. I am certain. Bottom line, the fundamentals are sound. INGREZZA makes a profound change in TD suffers lives and the vast majority of TD suffers are either not diagnosed or not yet being treated appropriately. The opportunity in front of us remains tremendous and we are steadfastly committed to serving all TD sufferers.

With that, I would like to turn the call over to Matt.

[Matthew Abernethy, Chief Financial Officer]

Thanks Kevin. Good afternoon everyone. I'll keep my comments brief and not reiterate all the financial information included in our earnings release to allow more time for Q&A. INGREZZA sales in the third quarter were $254 million and $248 million on inventory adjusted basis. This compares to inventory adjusted sales of $256 million in the second quarter. The sequential decline was driven by two items. First, we saw a slight decline in refill rates, but the rate still remains very strong and at the higher end of historical norms.

Second, new prescriptions slightly increase versus Q2, but continues to lag behind pre-COVID levels, primarily due to the fact that around 40% of patient visits with psychiatrists are still being conducted virtually. We continue to adapt our business model to account for both in-person and telemedicine visit. But believe that diagnosis of TD is best done in person. We see the slowdown in growth temporary. COVID has a clear impact on the development of the TD market, but we continue to see very high rates of compliance with our existing patients, which is encouraging.

In addition, recent NRx trends have been improving, but we acknowledge, we're not out of the woods yet given the pandemic recent resurgence. We remain excited about the medium and long-term potential of INGREZZA and we'll continue to adapt in the current environment. On the expense front, we've narrowed our 2020 Expense Guidance Range. Note that we expect our investment in R&D to expand in 2021 to support our growing mid to late-stage pipeline. In closing, with INGREZZA our pipeline and strong balance sheet, we remain very optimistic about our future as we continue to build a leading neuroscience company.

With that I will hand the call over to Eric Benevich. Eric?

[Eric Benevich, Chief Commercial Officer]

Thanks, Matt. I'm pleased to provide an update on our Q3 commercial performance and I'll start off by saying that I'm proud of our team's continued dedication to improving diagnosis and treatment rates for patients living with tardive dyskinesia. While the long-term opportunity for INGREZZA is as compelling as it has ever been. We are adapting and executing well given the near-term challenges brought on by the pandemic.

INGREZZAs value to patients was evident with Q3 persistence and adherence rates for existing patients in line with the very strong historical rates we've come to expect from INGREZZA. As it relates to new patients in the very near term, the start-stop nature of the pandemic will continue to have an impact on NRx growth across the biopharmaceutical sector in general and psychiatry in particular. The steady rate NRx demand we saw in Q2 continued to Q3. Although access to healthcare provider customers in Q3 remained challenging relative to the pre-pandemic period, our team continues to make progress with call volumes, steadily ramping up and a split of about 50-50 between in-person versus virtual sales calls. And as Matt mentioned, we have seen positive recent trends for INGREZZA, which coincided with increased customer call volume and promotional activity.

Looking ahead, as we've noted before, nothing can truly replace in-office face-to-face interaction between a healthcare provider and a patient, especially as it relates to diagnosing a movement disorder like tardive dyskinesia. During the early months of the pandemic, the top priority of provider was rightfully on addressing patients acute mental health needs such as increased anxiety or worsening of the depressive symptoms. And in accordance with shelter in place mandates, many psychiatrists practices significantly limited in-person access to patients or shutdown entirely.

It was unclear when patients would be comfortable or even allowed to physically see a physician or an allied health professional again in an office or clinic setting. While trends for psychiatric outpatient in-person visits are improving, they were - they are nowhere near pre-pandemic levels just yet. Syndicated data indicate that total psychiatrists visits inclusive of both in person and telehealth remain decreased by about 15% to 20% versus the pre-pandemic baseline. At the same time psychiatrists have been among the slowest specialties to physically return to working in the clinic or private practice setting in part due to the adoption of telemedicine.

In fact, as Matt said earlier syndicated data show that as of October approximately 40% of all psychiatry patient visits are still conducted via telehealth versus about 6% across all physician specialties. As mentioned before telehealth creates unique challenges to the diagnosis of a movement disorders, such as TD. In addition, third-party data indicate that psychiatrists are about 40% less likely to initiate new to brand prescriptions during that telehealth versus an in-person visit.

So the combined dynamic of lower total patient visits and a high proportion of telehealth visits in psychiatrists has created a unique near-term challenge for our team, which we are navigating well. There is no doubt the telemedicine is here to stay, especially in Psychiatry. At Neurocrine, we were in - we're investing in virtual health capabilities, even before the onset of the pandemic and we're building what we believe will be a source of competitive advantage for us over the longer term. While the pandemic has created many transient challenges, one thing it has done is highlight the importance of mental health.

Today, we believe the vast majority, around 80% or more of patients with tardive dyskinesia remain undiagnosed. Furthermore, the use of antipsychotic medication associated with TD incidents only continues to rise. While we've made great progress over the last several years with INGREZZA, the fact remains that we still have a tremendous opportunity ahead to help even more patients. And as the economy improves over time, we will continue to focus on TD educational efforts with physicians, allied healthcare professionals, patients and care partners, while also investing in new techniques to accelerate diagnosis and treatment rates for the many patients who still need our help across all sites of care and visit types. This is our firm commitment.

So switching gears to ONGENTYS, I can provide some qualitative Insights, now that we are several weeks into our launch. Recall that ONGENTYS launched in late Q3 as an add-on adjunctive treatment for patients experiencing off episodes with Parkinson's disease. In mid-September, we conducted a highly successful virtual launched training meeting for our field teams and we're very excited to bring this new treatment option to patients with Parkinson's. Our early efforts are focused on physician and patient education highlighting that ONGENTYS is a promising new treatment option that can help optimize levodopa treatment.

ONGENTYS is a differentiated COMT or COMT inhibitor that offers convenient once daily dosing, strong efficacy and is well tolerated. As mentioned, we are still very early in the launch process. The receptivity from neurologists has been positive thus far. We are seeing strong share of voice and utilization of our ONGENTYS sampling program, which is providing important product experience for both neurologists and patients. In conjunction with the launch, we've been pleased with our improved access to neurology movement disorder practices. We're seeing that the launch of ONGENTYS has helped drive higher neurology call volume for INGREZZA, which we expect to benefit our efforts in TD. So heading into year-end, we will continue to introduce ONGENTYS to the Parkinson's community and execute against our launch plan. Our aspiration is not only to displace current COMT inhibitors, but also to be prescribed earlier and earlier in the treatment paradigm ahead of alternative adjunctive treatments from other drug classes.

In summary, our team continues to do an excellent job as we manage in the adapt through the many near-term challenges brought on by the pandemic. One thing that hasn't changed is that we remain steadfast in our commitment to deliver on the long-term potential of both INGREZZA and ONGENTYS. And I remain highly optimistic about our prospects.

Now I'll turn the call over to my colleague Eiry Roberts, who will provide an update on our progress with the pipeline.

Eiry?

[Eiry Roberts, Chief Medical Officer]

Thank you, Eric, and good afternoon to everyone. Before I provide an update on our clinical programs, I want to thank our staff at Neurocrine and across all our partnership organizations for their commitment in advancing our many research and development programs, especially in light of the pandemic, conducting studies in a safe and effective manner remains our top priority. As this pandemic evolves, we continue to respond and adapt our approach and processes to ensure that we can safely progress our pipeline and deliver on the commitment to relieve patient suffering and enhance lives.

I will now provide a pipeline update, beginning with the very good news in Q3 of the initiation of the CATALYST study, our single global registrational study of crinecerfont for adults with the classic form of congenital adrenal hyperplasia or CAH. Recall, we gained a critical alignment on the design of this single registrational study design from the FDA, EMA, patient advocacy groups, key opinion leaders and payers. We are currently deep into the initiation of the study globally and look forward to providing additional updates as the trial advances. In addition, the Phase 2 proof of concept pediatric study with crinecerfont is back up and running after a brief pause earlier this year due to COVID-19 and we are making good progress towards the initiation of a single global registration study in pediatric patients in 2021.

Moving on to valbenazine, the KINECT-HD Phase 3 registration study run in collaboration with the Huntington Study Group to assess valbenazine as a potential treatment for chorea in patients with Huntington's disease has reinitiated enrollment and is progressing well. For our Parkinson's disease gene therapy program NBIb-1817 obtained through our collaboration with Voyager Therapeutics. A little earlier this month, the Data Safety Monitoring Board for the RESTORE-1, Phase 2 clinical trial met and reviewed certain patient imaging data from the ongoing study. Following this review, the DSMB requested additional patient level data and recommended a pause in dosing of patients in RESTORE-1, pending review by the DSMB of these additional data. Although the DSMB informed us that patient screening for RESTORE-1 could continue, given the trial sites participating in this study are not currently screening and enrolling patients in response to the COVID-19 pandemic, we have elected to delay the planned resumption of patient screening in the RESTORE-1 study until the DSMB is able to complete its evaluation. This will likely occur towards year-end. Additionally, in accordance with FDA's safety reporting requirements, we are also preparing a single expedited IND safety report.

Turning now to NBI-827104 or 104 for short, the potent and highly selective T-type calcium channel antagonist in-licensed from Idorsia earlier this year, I am pleased to announce that we are currently initiating a Phase 2 study in a rare pediatric epileptic encephalopathy called Continuous Spike and Wave During Sleep or CSWS. CSWS typically impacts children initially between the ages of 2 and 4 years old and manifest itself via a variety of seizure types, including atypical absence seizures, generalized tonic-clonic seizures and focal seizures that usually occur during sleep.

In addition children with CSWS often present with cognitive, behavioral and developmental regression or delay. Due to the differentiated mechanism of action of this molecule, when compared to non-selective calcium channel inhibitors, treatment with 104 could lead to an enhanced benefit risk profile for patients with this rare pediatric form of epilepsy. In addition, 104 has the potential to expand into a range of other central nervous disease areas. We are currently working in preparation for studies in several of these areas and we'll provide an update on additional indications as they progress in the clinic.

Finally, and very importantly the assets included as part of our collaboration with Takeda are making good progress. The lead clinical asset NBI-1065844 formerly known as TAK-831 is progressing very well towards completion of the Phase 2 study to assess the efficacy and safety of 844 as a treatment for negative symptoms of schizophrenia. We anticipate sharing results from this study in the middle of next year. I'm proud of the progress we've made across research and development at Neurocrine as we stay laser focused on building a diverse pipeline across multiple disease states, patient populations and phases of clinical development.

This pipeline has the potential to address significant unmet clinical needs that remain worldwide for patients in the fields of neurology, neuropsychiatric and neuroendocrinology. We continue to adapt and respond to the many twists and turns brought on by the pandemic with the primary focus at all times on ensuring the safety of our trial subjects on the effective advancement of the pipeline.

With that, I'll hand back to you, Kevin. Kevin?

[Kevin Gorman, Chief Executive Officer]

Thank you very much. Eiry. I think that's it for our prepared remarks. So what we'd like to do is use the rest of our time for your questions.

[Operator]

[Operator Instruction] we will take our first question from Josh Schimmer from Evercore ISI. Your line is open.

[Josh Schimmer, Evercore ISI]

Thanks so much, I have a question on a couple of potential headwinds for INGREZZA. To what extent has social distancing and face mask been a motivating factor for patients, seeking treatment of kind of dyskinesia because their disease may be less noticable as a result and you had another quarter of inventory build, when do you expect this might reverse and to what extent? Thanks.

[Matthew Abernethy, Chief Financial Officer]

Hey, Josh. Good to hear from you. I don't think we would chalk up a patient fear associated with the return to in-person patient visits. I think just the ease of using telemedicine during this pandemic to help many patients with mental health disorders has become very convenient. So I think because they been utilizing telemedicine prior to the pandemic, it was a much easier transition. There is clearly a concern by anyone about the safety of going into offices. But I don't think that that would be chalked up as the primary.

On the inventory front, it's really difficult to predict. It's something that we intentionally do not manage to avoid the optics of channel stuffing. And over the last four quarters alone, I believe we've had over a $30 million build an inventory. In this quarter, once again we had a build of another $6 million. So at some point, my expectation is that should and will bleed back down, but hard to predict how much and when. So we'll continue to disclose inventory adjusted sales to take out that dynamic to give you guys a view as to underlying demand and we'll keep you posted. But that is something I know hard to model, but encourage you guys to think about measuring us on inventory adjusted basis.

[Josh Schimmer, Evercore ISI]

Okay. Can I just clarify the question, I wasn't asking us so much about patients nervous about going to the doctor, I was just wondering because they're wearing face masks and they're not interacting with other people so much, they don't feel the need to have their tardive dyskinesia under the same control, just got a social optics?

[Eiry Roberts, Chief Medical Officer]

Josh, I do apologize for misinterpreting the question, but, no, that's not something that we see as a big headwind at this point.

[Kevin Gorman, Chief Executive Officer]

And, Josh, I would just say, this is Kevin, that would be hard for us to know. With that - I don't know how that will get communicated either to the decision staff loved ones and then back up to us. So you bring up something that is hypothetical, but I don't have a way to answer it at this point in time.

[Josh Schimmer, Evercore ISI]

Got it. Thanks so much.

[Operator]

Our next question comes from Tazeen Ahmad from Bank of America. Your line is open.

[Tazeen Ahmad, Bank of America]

Hi, good afternoon. Thanks for taking my questions. On the quarter itself, Kevin, I just wanted to get a little bit more color. So in 3Q, ex-inventory you were at (inaudible) versus the roughly (inaudible), you came in at for 2Q. Now, in your press release you did say that new prescription did increase slightly in the third quarter that refill and persistence moderated. So I'm assuming refill and persistence rates went lower. I'm wondering if you can give some color about those two particular items, refill persistence and the discontinuation rates, how they're looking so far in 4Q? And as far as geography goes, are there other specific geographies where more doctors, offices, psyches are open relative to other parts of the country? Thanks.

[Eric Benevich, Chief Commercial Officer]

Yes, so on the new patient front, we did have a slight increase during the third quarter in the comments about the recent, I guess positive trends that we've been seeing, we're really exiting in Q3 and then into Q4, but still below pre-pandemic levels. So I think on the interactive front, we are encouraged. I mean, the rate of diagnosis of TD is greater than the reduction of in-person patient visits. And I think that's the team doing a great job there. You know for us what is encouraging, though when we look back and we get asked the question, what is your long-term believe.

Why are you so bullish over the long run and there is a lot of qualitative aspects to that, whether it's feedback from patients, reps, doctors, surveys et cetera, but a couple of quantitative measures would be exiting Q1 this year prior to COVID. We were at a record all time interacts level per week, and that was really progressing well. Once COVID hit, we took a step down and we pretty much as we've said on the last two calls flat lined from where that step down was and now, we're seeing a little bit of a recovery. And how to think about that in Q4 is as Kevin said, in the winter time and what we're seeing with the pandemic surging a bit that you would potentially have some more incremental pressure on NRx in Q4.

As it relates to levels of persistency and compliance, it has been very encouraging to see patients stay on medicine through the pandemic. Persistency rate remains extremely high and then also the rates of refill are still at a level above historical norms. So what I would say for the quarter sequentially, there was a step down largely due to that drop in compliance. But the drop, a slight drop can cause a bigger number and overall TRx. So hope that answers your question Tazeen and good to hear from you as always.

[Operator]

Our next question comes from Paul Matteis from Stifel. Your line is open.

[Paul Matteis, Stifel]

Hey, great. Thanks so much for taking my questions. I was wondering now maybe - now given these challenges and given that consensus have seemed to kind of model, continued strong that patient adds, have you guys re-thought at all whether or not it makes sense to give guidance even on a quarterly basis or maybe for 2021? And then separately, I was kind of curious if you could just comment on net price and where that's going, it looks like gross to net went up this quarter, is that a trend you expect to occur as well in 4Q in 2021?

[Kevin Gorman, Chief Executive Officer]

So, Paul, on the question of guidance it's a fair one. There still are quite a few moving parts here, and that has been one of the primary reasons why we haven't given guidance up until now. We continue to discuss it internally and with our Board of Directors and so we hear you on that. As far as the second half of your question.

[Matthew Abernethy, Chief Financial Officer]

The only thing to add to what Kevin said was, I mean this is probably Paul the farthest this that we've gone if you listened to Kevin's prepared remarks earlier. We're not claiming victory here. We could have an underlying flattish quarter is what he had said and that's not accounting for what could happen with inventory. So I do think, and want to make sure people heard that in us trying to be a bit more specific as to what could happen based upon what we're seeing at a COVID. The second question on gross to net, yes, there was a pullback in net revenue per script this quarter. It was - it slightly declined I think around $100 and that was largely due to contracting that we had entered into preserve strong access. So I think that's been our mission all along is to ensure that if INGREZZA is written that a patient will ultimately get that script and we continue to be successful in that regard, but this quarter did have to do with some contracting. Now as you think about contracting for 2021, not - there isn't anything that we would flag to you that would give us concern around access and no material change at least at this time based upon what we know to overall net revenue per script. You could see it somewhere near where it's at today. So hopefully that's helpful Paul. Thanks.

[Paul Matteis, Stifel]

Yes, it is. Thanks?

[Todd Tushla, Vice President, Investor Relations]

Jamie, we'll go and take the next question please.

[Operator]

Okay. Our next question comes from Biren Amin from Jefferies. Your line is open.

[Biren Amin, Jefferies]

Yes, hi guys thanks for taking my questions. Maybe on INGREZZA, how much do you think that the current script trends are related to COVID versus hitting a ceiling in the TD market and in Q2, I think you had seen a step-up in refills. So I'm just trying to understand the slight moderation refills in Q3 given we had COVID across both quarters?

[Kevin Gorman, Chief Executive Officer]

Yes Biren, good to hear from you and I can say without equivocation that the - what we're seeing now is 100% due to COVID. There is no ceiling effect that we're seeing with the growth of this market. And as far as the second part of your question.

[Matthew Abernethy, Chief Financial Officer]

Yes Biren, on the refill front, if you recall Q1 is always low from a refill rate per patient because they're going through that reauthorization process. So Q2 was really a recovery from a lower Q1 and then as you move from Q2 to Q3, it was a slight decline but nothing notable. So I would say INGREZZA does have sensitivity to COVID from a new patient perspective, but as it relates to compliance o9r persistency, we've not seen anything material that we would chalk up associated with COVID and to your point on the question and what Kevin said and I mentioned earlier. Prior to COVID, we are at an all-time high of NRx per week. If we had seen that flattening or declining going into COVID, we may be would be sitting here not as optimistic. But with what we saw prior to COVID and then what we're seeing recently as call activity has increased, our enthusiasm remains incredibly high.

[Biren Amin, Jefferies]

Great, thanks for taking my questions.

[Operator]

Our next question comes from Phil Nadeau from Cowen & Company. Your line is open.

[Phil Nadeau, Cowen & Company]

Good afternoon, and thanks for taking my question. One on INGREZZA then one actually on the pipeline. So first on INGREZZA, in the past, you've suggested that we should look towards things like increases in in-person visits at psychiatrists as a leading indicator of win, NRx could return. On today's call, you suggest that maybe is more complication - it's more complicated than that. What do you think we asexternal observer should be looking at to predict return to growth in INGREZZA? And then second on the pipeline, you called out the pause in RESTORE, could you give us a bit more information about what data it was the DSMB saw that prompted the request/ Thanks.

[Eric Benevich, Chief Commercial Officer]

Yes. Hi, Phil, it's Eric, I'll take the first part of your question. So I mentioned in my prepared remarks that nothing really is better than an in-person visit between a patient and a provider, especially as it relates to diagnosing a movement disorder like TD. And we are seeing that in-person patient visits have increased, they really were bottoming out around the April-May time period and had been creeping up, but still in psychiatry, about 20% lower than what they were in the pre-pandemic period.

The other complicating factor is the prominence in the adoption of telemedicine in psychiatry, which provide some challenges to making a diagnosis of TD remotely. So those two things are going to be indicators that you need to kind of keep an eye on. One is just seeing foot traffic increase in psych private practices and in psych clinics, and that's a strong indicator. And secondly, our ability to continue educating providers on how to look for and screen for TD when conducting a remote patient visit via telehealth and so that's been an area of focus. As we mentioned earlier telehealth isn't going anywhere, it's going to continue to be a prominent part of psychiatric going forward. And we're working hard to make sure that providers are confident and comfortable in their ability and willing to screen for and diagnose TD remotely.

So I'll turn it over for the second half of your question Eiry.

[Eiry Roberts, Chief Medical Officer]

Hi, Phil. Thanks for the question. So, couple of things, first of all I'm blinded to all of the data on the RESTORE-1 study as is all of the remainder of our management team. And as a result, I don't know anything further about the finding beyond what I was able to share with you, but I will say though, just to reiterate, was that the DSMB will looking at, certain Neuro Imaging information, scan data from patients in the RESTORE-1 study and based on their observation requested a pause in the dosing of subsequent subjects, not a pause in screening or a halt to the study, pending their ability to access additional information and review that. The decision to not reinitiate screening at this time, was actually taken by us and in parallel with that, we are also filing a single safety report with the FDA. So that is all I know at this point in time and I'm not able to provide any other information.

[Phil Nadeau, Cowen & Company]

That's helpful. Thank you.

[Operator]

Our next question comes from Brian Skorney from Baird. Your line is open.

[Brian Skorney, Baird]

Hey, good morning - good afternoon guys, thanks for taking the question. I don't see anything called out specifically on crinecerfont and was just wondering, I know you had previously said that you were planning to start the registrational study in the second half of 2020 and sort of the impacts of COVID, is there any change to that guidance and anything to be aware of regarding the progress on that program?

[Eiry Roberts, Chief Medical Officer]

Yes. No, Brian. Thanks for the question. It's Eiry here. We're making good progress with the adult single registration study globally. We have initiated that study and we're right in the middle of the startup process there and as soon as we have further information on that study and enrollment proceeding, we will be able to give an update. With respect to the pediatric registrational study, we're also making good progress on aim to initiate that study during 2021.

[Brian Skorney, Baird]

Right. Thank you.

[Operator]

Our next question comes from a Anupam Rama from JP Morgan. Your line is open.

[Anupam Rama, JP Morgan]

Hi guys, thanks so much for taking the question. Maybe just piggybacking on some of the refill questions on the slight decline that you saw, were there any types of specific trends, whether patient type - of patient that's been on drug for a while versus a relatively new patient or specific pharmacy dynamics that we should be considering on this sort of quarter-over-quarter decline you saw on refills? Thanks so much.

[Eric Benevich, Chief Commercial Officer]

Yes, hi. I'm Eric. So we don't have that level of detail, at the patient level necessarily to address those questions. I think what Matt had said earlier was that Q2 represented a historically high refill rate coming off of a relatively lower rate from Q1, higher than what we had seen in previous quarters during the launch. Q3 essentially refill rate returned to what I'd call historical norms, wasn't low, it just wasn't historically high and it wasn't a significant decrease either from Q2. So we continue to see high persistency and high adherence and it's sort of those two things combined lead us to believe that compliance with INGREZZA remains high, even during this pandemic period. So we're continuing to focus on that, but as you can imagine, we're also continuing to focus on driving new patient starts, which we've been pleased with as we exited Q2 and into Q3.

[Matthew Abernethy, Chief Financial Officer]

Anupam, the only other clarification that I provided given the last couple of questions are, when you look at our inventory adjusted sales, the underlying TRx was relatively flat. The dollar amount of revenue went down $6 million, largely because we had an increase in gross to net reducing our net revenue per script. So there was impacted by the reduced compliance rate as we said. However, I just want to make sure, as you're looking at the result it is pretty much a flattish type TRx quarter adjusting for inventory.

[Anupam Rama, JP Morgan]

Got it. Thanks so much sort of clarifications.

[Operator]

Our next question is from Brian Abrahams from RBC Capital Markets. Your line is open.

[Brian Abrahams, RBC Capital Markets]

Hey, guys. Thanks so much for taking my question. I was wondering if you could speak on your latest views on use of capital with respect to, I guess increasing our investment in commercial investment in INGREZZA to get through some of the transient COVID headwinds versus progressing the pipeline versus perhaps bringing in later stage asset externally? And I'm also wondering with respect to INGREZZA, are you guys seeing any impact on - from patients switching to new alternative antipsychotic treatments in certain segments, which might have fewer intrinsic motor (inaudible)? Thanks.

[Kevin Gorman, Chief Executive Officer]

Hi, Brian. I'm going to take the first half of your question first. And that is on the use of capital. There is no better use of our capital than supporting INGREZZA and being able to bring this to as many of the TD suffers as possible. I keep reiterating that we are at the very, very early stages of the development of this marketplace. There are still at least 80% of the patients who have TD are undiagnosed. Of that 20% that have been diagnosed, only about half of them are on a VMAT2 inhibitor.

And so they're still not being treated in what we would say would be the optimal manner for their TD and as we've seen with patients who had their TD treated appropriately, it has been a real-life changer for those patients. So we will continue to focus exquisitely our initial dollars always on supporting INGREZZA. Beyond that and we have ONGENTYS, and ONGENTYS from the moment that we first touched that we understood this is going to be an important drug for the adjunctive treatment of Parkinson's patients.

And so that's what led us into secondarily a deal like that showed us that ONGENTYS is going to be something that's going to synergize real well with INGREZZA. So you can see the thinking behind our use of proceeds. And then as you look at the development of Neurocrine, we will always lay our best, - we're the best science leads us in our pipeline. So that's internal science that's external science in our pipeline, because we're not going to and we are not a - in the future going to be a one compounds story here.

We are building a world-class neuroscience company. We've got neuropsychiatric, neurology and neuroendocrinology as foundation principles for us. And in each one of those, we are building our pipeline, but rationally as we see progress in one area or another, that's where we're going to lay more and more of our best into that area or onto that compound. So, in each case it is to move our pipeline along quickly, but rationally based on the data that we are generating at each step of the way. Now I hope that answered the first part of your question.

The second part remind me.

[Eiry Roberts, Chief Medical Officer]

I could answer that. Your question, Brian, if I understood it correctly was whether the use of more second generation or atypical antipsychotics, we thought was resulting in a headwind, so to speak. I think to reiterate just the previous discussion, I mean it's very clear that less than 20% of the overall population suffering from TD is currently recognized and treated appropriately. And what we also know is that given the environment we find ourselves in now, the growth in patient suffering from neuropsychiatric disorders within the pandemic and outside of that is very significant. And so although there may be some switching of the types of antipsychotics that are used, I think that's highly unlikely to be having an impact, right now in terms of the overall environment. And then, Eric?

[Brian Abrahams, RBC Capital Markets]

That's really helpful. Thank you.

[Eric Benevich, Chief Commercial Officer]

One thing I'd like to add on top of Eiry's comments is that, even though we say that only about 20% or so of the TD population has been diagnosed, of those that are diagnosed, only about half or even offered a VMAT2 inhibitor, and we're trying to change that behavior. Recently, the American Psychiatric Association published their updated guidelines for the treatment of schizophrenia and in those guidelines, there is a section on TD. This is important because it recommends the use of VMAT2 inhibitors as first-line treatment for these patients whereas previously before INGREZZA, the recommendation was simply to adjust the antipsychotic regimen. So not only are we driving to improve the rate of TD diagnosis, but we're also driving to make sure that patients get offered the only evidence-based approach to treating TD, which is the VMAT2's and specifically INGREZZA.

[Brian Abrahams, RBC Capital Markets]

Thank you so much.

[Operator]

Our next question comes from Jay Olson from Oppenheimer. Your line is open.

[Jay Olson, Oppenheimer & Co.]

Hey, thanks for taking the questions. I appreciate your earlier comments about some of the shortcomings with telemedicine in the diagnosis of tardive dyskinesia. Are there other forms of virtual medicine that you can leverage to overcome those for example Zoom video or may be FaceTime videos to facilitate the diagnosis of TD? And then for ONGENTYS, are you expecting a similar negative impact from COVID that you're seeing with INGREZZA to also impact the launch trajectory of ONGENTYS and can you provide any anecdotal feedback that you're getting from doctors and patients during the launch? Thank you.

[Kevin Gorman, Chief Executive Officer]

Jay, I'm going to just in very briefly, and I'll let Eric take it from there. We are shorthand when we say telemedicine. We do mean that we're talking about electronic media. So within that there is a video-base, but with psychiatrists, there is a significant part of that telemedicine that is telephone only. I'd say, maybe up to up to half of their telemedicine is that. So I'll turn it over to Eric to embellish upon that and to answer the second part of your question about ONGENTYS.

[Eric Benevich, Chief Commercial Officer]

Yes, certainly, a big part of our effort over the last few months in terms of helping prescribers and providers to improve their confidence in their competency in diagnosing TD via telehealth platforms has been around - I'll call it sort of the tips and the techniques associated with a video plus voice call or a voice only call. As Kevin mentioned, in psychiatry, a significant proportion of these telehealth patient visits our voice only and certainly that can present a challenge for a visually-oriented condition like TD.

So one of the things that we've been doing is equipping providers with the types of questions to ask, when they're talking to a patient. And also on the patient side, the things that they need to bring up with the provider if they are experiencing abnormal movements, so that they can move towards getting a more in-depth assessment of their abnormal movements. In settings where you have a video component, whether it's Zoom or even using a smartphone like FaceTime, using a FaceTime platform, one of the things that we've been doing kind of going back to one of the earlier questions is reminding to providers when you're talking to your patient have them take up their mask so that they can see the face more fully.

Ideally also have someone there with the patient that can hold the camera, so they can see other parts of the body, such as the hands or the trunk. So it's important to look for TD more broadly than just in the mouth or the jaw, because they can occur anywhere, including in the periphery. So certainly we've been providing education around how to - how to conduct TD assessment remotely and it's been very well received in a number of national educational Zoom training programs that we've been offering. And as it relates to ONGENTYS, certainly we knew when we plan to launch ONGENTYS in September, that would be launching into environment that's partly virtual and partly in person. And so, as I mentioned in my prepared remarks, we had a 100% virtual training meeting for our field sales team and I think the benefit of that that was it prepared them to introduce ONGENTYS to neurologists virtually or in person. And I will say that the percentage of neurologists that are back practicing in their clinics is much higher than what we see in psychiatry.

The percentage of patients that they're seeing in person is much higher than what we're seeing in psychiatry. And as Kevin said, having the ONGENTYS launch has given a lift in terms of our call activity and our opportunity to talk about both products with movement disorder specialists. So thus far. It's very early in our launch cycle, but the feedback has been very positive about the clinical profile in the labeling. We've seen a lot of requests for samples out there and we're still in the process of introducing ONGENTYS more broadly across the Parkinson's community, but we're very pleased with the receptivity and the execution of our launch thus far.

[Jay Olson, Oppenheimer & Co.]

Super helpful, thank you for all the details.

[Operator]

Our next question is from Laura Chico from Wedbush. Your line is open.

[Laura Chico, Wedbush]

Good evening. Thank you very much for taking my question. I guess not to continue too much on the same theme, but I wanted to understand a little bit more. What sense do you have, is the INGREZZA pullback perhaps related more to the psychiatrists, being a little bit more constrained in their overall bandwidth versus the telemedicine focus and I guess you kind of hinted at it multiple times here, but we've seen depression and anxiety rates increased by about 4x to 6x. So I'm just wondering if this is more of a constraints on time and necessary or need to prioritize to address certain symptom and TD might be given perhaps lesser priority. And then I guess kind of related to that, could you just remind us what is the current split for INGREZZA in terms of psychiatric prescribing versus neurology and where you see that evolving over time? Thanks.

[Eric Benevich, Chief Commercial Officer]

So let me start with the second part of your question, which is our business split and we've said that psychiatrists through the first three years in the launch represented about 80% of our effort and about 80% of our prescriptions. And as just mentioned that neurology has been relatively less impacted by COVID-19 than psychiatrists, we have data that shows that patient visits dropped dramatically during the peak of the pandemic in the April-May time period, and they've been creeping up, but total patient visits are still about 20% less than what they were pre-pandemic and of the visits, about 40% are conducted virtually via telehealth, which is five or six times greater than most other physician specialties.

Psychiatry appears to be better suited to telehealth and maybe some other physician specialties and psychiatrists have really adopted telehealth. So I think it's a combination of the bandwidth component as well as the desire to practice via telehealth. And as I mentioned in my prepared remarks, at least early on in the pandemic physicians really focusing on the acute psychiatric consequences of the pandemic, meaning exacerbation of anxiety or depressive symptoms, but as we move forward, certainly, our teams have become more comfortable reminding their customers that TD hasn't gone anywhere.

These patients are still experiencing the abnormal movements, the disability associated with the movements and the stigma. And so we found a way to become more comfortable, encouraging and reminding and teaching the providers to continue to screen for TD. And I think that that's part of the reason that we've seen an uptick in NRx and new patient starts as we exited Q2 and into Q3, excuse me Q3 and into Q4.

[Kevin Gorman, Chief Executive Officer]

And Laura, as we said before the psychiatrists were the ones that had used telehealth, much more than any other specialty before the pandemic. They have used that continuously much more during the pandemic and we anticipate these levels to fall substantially from where they are now, but they will again be utilizing it more than the other specialties, well, which is why we've spent the effort prior and certainly during this and after this pandemic in order to be able to tap into that as a way to actually increase the availability of INGREZZA and the diagnosis of TD in telehealth.

[Laura Chico, Wedbush]

That's helpful. Kevin, I guess maybe just one quick follow-up. How far away are you from actually putting into place some of these new telemedicine initiatives and what metrics would be most useful to gauge their impact? Thanks very much.

[Kevin Gorman, Chief Executive Officer]

So that there are a number of these initiatives, some are very short term in nature. some are medium term in nature, the short-term once have just begun to be rolled out as we even discussed earlier at a banking conference and in the longer-term ones, they are playing the more long game here.

[Operator]

Our next question comes from David Amsellem from Piper Sandler. Your line is open.

[David Amsellem, Piper Sandler]

Hey, thanks. So just a couple, so first on ONGENTYS. I know these are early days in the launch, but can you give us a sense of the kind of patient you're pulling in or these patients who have been exposed or on COMT inhibitors in the past, are you getting a more varied mix of patients who are on other kinds of adjunctive therapies? And then secondly, can you just remind us in Huntingtons' chorea what the penetration is of VMAT2 inhibitor in that setting and just frame up for us how you are thinking about the underlying patient opportunity for valbenazine? Thanks.

[Kevin Gorman, Chief Executive Officer]

Yes, David, I'll take the first par, just to say that, it is way too early days for us to really comment on where it's coming from. I would just say that without a wealth of data to being looked through, it was our anticipation prior to launch that it would be coming from other COMT inhibitors or for patients, who would normally be put on a COMT inhibitor at that point in time and now the docs are using the latest one. Eiry, you want to take the second one?

[Eiry Roberts, Chief Medical Officer]

Yes, so with respect to Huntington's disease, about 30,000 patients in the United States have Huntington, about 90% of those have chorea of some sort with, about 70% of those being moderate-to-severe later in the disease. Even though I think it's very clear that VMAT2 inhibition is helpful in patients with Huntington's disease, only about 20% of eligible patients currently receive the treatment of currently available VMAT2 inhibitors and much of that is predicated on some of the challenges of the currently available medicines, both in terms of challenging titration schedules, multiple doses required during the day and obviously for patients with chorea, swallowing can be a significant challenge sometimes.

So we had significant amount of interest in our valbenazine trial in that regard and we are very encouraged by what we hope valbenazine will be able to bring for patients with Huntington's disease. In particular the investigator group has been very enthusiastic and we're very pleased with how we were able to get back up and running with the trial after we were paused for COVID. And just to remind you, obviously INGREZZA to date has been very well tolerated, has a very simple dosing regimen with no blackbox warning and that differentiate from the currently available VMAT2 inhibitor is in that disease state.

[Todd Tushla, Vice President, Investor Relations]

Can we let's do some more questions before Kevin closes?

[Operator]

Okay, let's see here. Our next question comes from Neena Bitritto-Garg from Citi. Your line is open.

[Neena Bitritto-Garg, Citi]

Hey guys, thanks for taking my question. I was just wondering if you could talk a little bit more about what's needed for the Xenon program to move that forward given the update recently and also if you could just explain a little bit about who is the rationale for testing that program in adult focal epilepsy as well? Thanks.

[Eiry Roberts, Chief Medical Officer]

Yes, so just a couple of comments there. We had I think communicated earlier in the quarter that we had submitted the IND to the FDA for a Phase 2 study in patients with SCN8A and the agency had come back and requested some additional non-clinical data that they required to support the dose justification in that pediatric trial. So what we're doing now is compiling a response to the agency and working with the agency to understand how we generate that additional non-clinical data and in parallel we working on how we can hopefully get a pediatric trial initiated sometime next year.

In addition, given the mechanism of action here and the fact that in focal onset seizures in adults, sodium channel antagonist saw beneficial in some circumstances, but limited in many circumstances due to the fact that they are not - most of the drugs currently available on non-selective and therefore, it requires a pretty significant dose to achieve any efficacy. We are again encouraged by the fact that this highly selective Nav 1.6 antagonist could demonstrate significant benefit in that population and we're moving ahead with planning to implement a study in adult focal onset epilepsy in the near future.

[Neena Bitritto-Garg, Citi]

Thanks.

[Operator]

Our last question will be from Evan Seigerman from Credit Suisse. Your line is open.

[Evan Seigerman, Credit Suisse]

Hi guys. Thank you so much for taking the question. I appreciate you squeezing me in. Just one, so I know we had really positive vaccine data today, which could help with the commercial dynamics for INGREZZA but given that the population more broadly probably won't have inoculated until mid-year. Should we expect continued softness in the fourth quarter and into the first half of next year or are you seeing or do you think you'll be able to overcome that with some of the telemedicine initiatives that you've been describing on this call? Thank you so much.

[Kevin Gorman, Chief Executive Officer]

Yes, thanks I really was gratified, I think as many people were to see the data that came out of Pfizer and we hold high hopes that data continues from that trial look as good as it did and also from the other vaccine and therapeutic trials that are going on right now. What you're asking is that, and I'll answer it in respect to Q4, is the fact that as COVID in the societies go through the waxing-waning-waxing aspects of COVID infection, have pointed out here that the psychiatric community is particularly affected by that, like the rest of society, the psychiatric community will adapt to this over time Independent of vaccine. And as we've tried to tell you here today that we are adapting to that type of environment within the psychiatric community also.

So that even through the continued use of telemedicine we're going to actually turn that from a disadvantage to an advantage incrementally over time. As the COVID crisis lessens over time with or without vaccines or the timing of vaccines, we anticipate that our business will then return to growth. What we are being on this call, I think is one that we're very measured and we're with our optimism. We have a great belief in this drug in our ability to serve these patients and in being able to get where we had talked about before and COVID average struck that we're still at the very beginning, so this is a wonderful opportunity for patients and then our business in front of us. So I do kind of disassociate the two, even though the two are put together.

[Evan Seigerman, Credit Suisse]

Great, thank you.

[Operator]

That does conclude our question and answer portion of the call. I will now turn the program back over to Kevin Gorman for any additional or closing remarks.

[Kevin Gorman, Chief Executive Officer]

Thank you very much. And I really did enjoy our conversation that we had here today. Sitting here in November, I'm looking at 2020 coming to - coming to an end here in several weeks and to say the least, this has been highly unusual year. But I am very proud of Neurocrines employees and our partners throughout everything that we and you have had to endure during this period of time, but I remain very optimistic about our future. If you haven't heard it, while we do still certainly are aware that the COVID situation that we face is going to be something that we're going to be dealing with here through Q4.

But the bottom line is INGREZZA is a crucial therapy for the well-being of TD suffers. And as you've heard over and over from me on other calls, this call, we're only at the beginning to serve this patient population. During this pandemic, you've seen that we've been able to add a number of promising potential medicines to our pipeline and carry these into the clinic and this pipeline is a balanced pipeline from stage of development, but it's also a highly diversified pipeline by mechanism and by disease states. And that gives us great hope that we're going to be very successful going forward with this pipeline and continuing to add to it. And as I think as Eiry had said to you, there is a number of opportunities for many of the compounds in this pipeline in a variety of diseases. So we're working through the transient near-term effects of this environment, but our commitment and our optimism for our patients and our business is absolutely unchanged. It remains high and I look forward to talking with you all in the coming weeks at different virtual banking meetings and in our one on one calls. Thank you again very much.

[Operator]

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