Neurocrine Biosciences Inc

NASDAQ:NBIX

Earnings Call Analysis

Neurocrine Optimistic Amid Strong Growth

Neurocrine Biosciences exhibited a solid quarter attributed to the expansion of its sales force and underlying growth in all its business segments. The sales increase reflected well-executed strategies in the neurology, psychiatry, and long-term care domains, alongside a successful DTC campaign. Notably, the tar dive dyskinesia (TD) diagnosis rate climbed from 30% to 35%, with around two-thirds remaining undiagnosed, indicating significant room for growth. Data from the focal onset seizure study for NBI-352, a proof-of-concept study, is expected this quarter, arousing interest due to its potential. Huntington's disease, while a smaller market with 20,000-25,000 patients and only 20% treated with VMAT2 inhibitors, still represents a meaningful opportunity. The company is set for continuous growth heading into 2024.

Pipeline Advancements and Analyst Day Update

Neurocrine Biosciences has had an exciting time with their pipeline development, as they remain on schedule to deliver topline data for NBI-352, which addresses focal onset seizures, and for NBI-846, targeting anhedonia in major depressive disorder. These developments are critical for the company's growth and will be discussed in detail during their upcoming Analyst Day.

Factors Driving Sales Growth and Tardive Dyskinesia Diagnosis

The robust growth in sales can be attributed to maintaining momentum through the year, benefiting from an expanded sales team. The company's direct-to-consumer (DTC) campaigns have performed well, and despite this success, a significant growth opportunity still exists, given that the majority of patients with Tardive Dyskinesia (TD) remain undiagnosed and untreated. In the context of TD diagnosis, the rate has increased from 30% to 35%, and the company anticipates this rate will continue to climb, indicating a considerable untapped market potential. However, the rollout for Huntington's Chorea had minimal impact on the current quarter's sales, suggesting that the main focus remains driving TD diagnosis and treatment, not Huntington’s indication.

Clinical Trial Results and Commercial Outlook for New Indications

The focal onset seizure study has a primary focus on tolerability and safety, with promising indications in seizure frequency reduction for the patients involved. While the study for Huntington’s Chorea targets a significantly smaller patient population, of which only 20% are treated with a VMAT2 inhibitor, it reflects an opportunity to improve treatment rates in this demographic, albeit a smaller commercial opportunity compared to TD.

Long-term Care Segment's Contribution to Q3 Success

The Long-Term Care (LTC) segment has been a meaningful contributor to the company's strong performance in the third quarter. A year and a half into the targeted launch in the LTC market, the company has focused on education and driving diagnosis, which are beginning to yield benefits in terms of increased treatment within the segment. The LTC initiative mirrors the company’s broader strategy of targeting untapped markets and treating undiagnosed patients.

Investment Priorities: INGREZZA, Research, and Pipeline Progress

Neurocrine Biosciences communicated that their investment priorities are clear, continuing to promote INGREZZA to a broader patient population and investing in their internal research capabilities. Significant milestones include an expected chronic treatment approach for their drug candidates subject to safety and efficacy data, with the company aiming to target both pediatric and adult patients. Moreover, they are preparing for potential submission and launch activities for crinecerfont next year, a treatment for congenital adrenal hyperplasia (CAH), which would be the first new therapy for these patients in over half a century.

Future Expectations and Guidance

Although there was no specific revenue growth or margin guidance provided for the next fiscal year during this earnings call, investors should look towards the company's performance at upcoming conferences, including the JPMorgan Health Care Conference, for potential strategic announcements.

Earnings Call Transcript 2023-Q3

[Operator]

Good day, everyone, and welcome to the Neurocrine Biosciences Reports Third Quarter results. [Operator Instructions] Please note this call is being recorded and [Operator Instructions].

It is now my pleasure to turn the conference over to Todd Tushla, President of Investor Relations. Please go ahead.

[Todd Tushla, executive]

Good morning. Happy Halloween, and thanks for joining Neurocrine's Third Quarter 2023 Earnings Call. I'm pleased to be 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 today's 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. After prepared remarks, we're going to try and get to all of your questions. So Kevin, take it away.

[Kevin Gorman, executive]

Thank you, Todd, and good morning, everyone. It's been a very, very good quarter. I'm not going to go into really any detail. I think everyone else who's going to be talking on the call will, and as always, we just want to spend as much time with your questions as possible. What I will say is that it's rare that you get to announce so much progress from a clinical standpoint with CAH from a regulatory standpoint with the Huntington's approval and then the outstanding work by our commercial and field medical units in bringing INGREZZA to so many patients and to having the success we're having there. That's all I really want to start out with today. So much to talk about. So what I'd like to do is I'd like to turn it over to Matt right now. Thank you.

[Matthew Abernethy, executive]

Good morning. Between our positive Phase III results in CAH, record INGREZZA sales and solid cash flow generation, we had an incredible quarter. During the quarter, INGREZZA sales were $486 million, reflecting 29% year-over-year growth. The INGREZZA commercial marketing and medical teams are doing an excellent job continuing to build and develop the tardive dyskinesia market.

With INGREZZA through Q3 at approximately $1.34 billion, we are increasing our guidance range to $1.82 billion to $1.84 billion. Our financial profile strengthened in Q3, resulting in non-GAAP diluted earnings per share of $1.54 and over $1.5 billion in cash at quarter end. We continue to prioritize our capital towards growing INGREZZA in both expanding and advancing our pipeline. As we mentioned during a recent call, we will be hosting an Analyst Day on December 5. The agenda will be focused on our R&D strategy and include preclinical and clinical pipeline updates. We will also feature a panel discussion on congenital adrenal hyperplasia centered on addressing the challenges of current therapies for patients, caregivers and clinicians. We look forward to seeing you all of you in New York.

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

[Eric Benevich, executive]

Thanks, Matt. Q3 2023 was a great quarter for INGREZZA with both strong continued growth from our TD franchise and the initial rollout of the new HD chorea indication, which I'll discuss later. It's been 6 years since our initial launch, and I continue to be impressed with our team's ability to help improve diagnosis and treatment rates for patients living with tardive dyskinesia and our just announced increase to the full year guidance range reflects our confidence in continued strong growth. In the half dozen years since the launch, we've grown the diagnosis rate of TD from low single digits to around 35% of the prevalent population. While this is great progress, it also means that about 2/3 of the roughly 600,000 patients who suffer from TD have not yet been diagnosed much less treated with a VMAT2 inhibitor like INGREZZA.

Net-net, we clearly have much work to do to help more TD patients get a diagnosis for their uncontrollable movements and have the option to be treated. In August, we were excited by the FDA approval of the new indication for the treatment of adults with chorea associated with Huntington's disease. Now we have an opportunity to help yet another patient community in need. The many thousands of those HD patients who today continue to suffer with untreated chorea. With approval occurring just a few short months ago, we are in the early stages of introducing INGREZZA to the HD community. But I can say that early feedback has been encouraging. Just as in TD, INGREZZA offers meaningful and differentiated benefits for HD chorea patients, including high selectivity for VMAT2 rapid and sustained efficacy, good tolerability, simple 1 capsule, once-daily dosing and comprehensive support programs. These are the reasons why INGREZZA is the most prescribed VMAT2 inhibitor and I'm confident that these attributes will translate well to the HD chorea community.

I'd like to close by congratulating our clinical development colleagues on the recent positive Phase III results for crinecerfont in both pediatric and adult congenital adrenal hyperplasia patients. The trial results were outstanding. I believe crinecerfont, if approved, has the potential to be a paradigm-changing treatment option. Today, the standard of care utilizing superphysiologic doses of glucocorticoids to suppress excess androgen production, creates unwanted side effects and long-term complications. Patients are faced with dealing with the undesirable effects of excess androgen production or the undesirable effects of chronic treatment with high-dose GCs. That's a terrible trade-off, and we believe crinecerfont can establish a new standard of care. From a commercial perspective, we'll be diligently working to demonstrate the high value we expect crinecerfont to bring to the CAH community. While it's premature to speculate on price, early discussions with payers have been productive in recognizing the benefits that lowering excess androgens and/or reducing GC exposure could bring to patients living with this inherited orphan genetic disorder. So at this time, I'll hand the call over to my colleague, Dr. Eiry Roberts, our Chief Medical Officer.

[Eiry Roberts, executive]

Thank you, and good morning. During our earnings call back in February, I noted that 2023 promised to be an important year for the Neurocrine pipeline. Today, I could not be more pleased to discuss how we are fulfilling that promise. Q3 featured several significant pipeline milestones, which I will address further beginning with our on-time FDA approval of INGREZZA for the treatment of chorea associated with Huntington's disease. As Eric noted, the vast majority of patients with HD chorea are currently untreated, given INGREZZA's attractive product profile and differentiated attributes, I'm confident that Eric and his team will be able to change that.

To further differentiate INGREZZA, we've developed the INGREZZA [indiscernible] formulation, which the FDA accepted as a new drug application last month. This potential new formulation could serve as a preferred alternative administration option for many of the tardive dyskinesia and Huntington's disease patients who have trouble swallowing or simply prefer not to take a whole capsule.

Turning to crinecerfont. I believe everyone is familiar with the outstanding top line statistically significant and clinically meaningful results from our adult and pediatric Phase III CAHtalystTM studies. There is much more data to share with you that will become available over time either in peer-reviewed journal articles or scientific conferences. During our [indiscernible] call earlier this month, Dr. [indiscernible] summarize the hope that the burden of congenital adrenal hyperplasia can someday be alleviated by a simple block and replace strategy with the androgen access caused by CAH managed by treatment with crinecerfont thus providing clinicians a significantly more flexibility in treating the cortisol deficiency caused by CAH with lower levels of exogenous steroids.

In our upcoming Analyst Day, as Matt mentioned, we are planning a panel discussion focused on the current burden of disease in CAH and how crinecerfont if approved, could potentially significantly ease that burden for patients, caregivers and clinicians. On the muscarinic front, our lead asset, NBI- 568 continues to enroll very well in the Phase II study in schizophrenia. In addition, the clinical trial application for NBI-570, our dual M1/M4 agonist was accepted, and that program is currently dosing in a Phase I study. These 2 compounds represent just the first of several muscarinic compounds that we will be advancing into the clinic over the coming months.

Finally, we remain on track to deliver top line data for both NBI-352 in focal onset seizure and for NBI-846 in anhedonia in major depressive disorder over the coming weeks. It has truly been exciting times at Neurocrine this past year, and I look forward to discussing many of our pipeline programs with you at our day. I'll stop here and turn it back to Kevin.

[Kevin Gorman, executive]

Thank you, Eiry. Nikki, I think we're ready for your questions now.

[Operator]

[Operator Instructions] I will take our first question from Philip Nadeau with TD Cowen.

[Philip Nadeau, analyst]

Congratulations on a very productive quarter. A question for Eric on INGREZZA. Eric, could you talk in a bit more detail about what was driving the strong sales growth in the quarter? Was it the result of the expanded sales force? Has there been any reduction in telemedicine use. Did the expanded label in Huntington's help. What were the factors that led to such a strong quarter? .

[Eric Benevich, executive]

Thanks, Phil. I think it's really just carrying forward the momentum that we've been seeing throughout the year. Obviously, we're experiencing the benefits of the expanded sales team. And frankly, I can say that we're growing nicely in all 3 of the business segments that we're in, neurology, psychiatry and now LTC. Our DTC campaign continues to perform well. And there's still a lot of opportunity for growth just based on the fact that the majority of patients with TD as yet remain undiagnosed and untreated. The last thing I'll say is that with regards to the HD chorea rollout, while we're excited about the opportunity to make a difference in that patient population, the impact on the current quarter is minimal.

[Operator]

We'll move next with Chris Shibutani with Goldman Sachs.

[Chris Shibutani, analyst]

I noticed that in the updated slides, you have the TV diagnosis rate increasing from 30% to 35% of the overall population. How much higher do you think this can go? And what is a potential in terms of the pace of growth might look like going forward? .

[Eric Benevich, executive]

Yes. We haven't given guidance in terms of where we think the diagnosis rate will ultimately net out. Though personally, I can say that we're far from the peak where we are now, 6 years in, we think about 35% of the TD patients have been diagnosed and that's really starting from a baseline at the time of launch in the low single digits. So we continue to increase the rate of TD diagnosis, and I feel really good about the progress that we've made. But still, approximately 2/3 of patients remain undiagnosed. And our research indicates that only about half the time when a patient is diagnosed with TD, or they offer treatment with a VMAT2 inhibitor. And so we have room for improvement, both in terms of the diagnosis rate and in terms of the frequency of the use of INGREZZA in that patient population. So still lots of room for improvement despite the progress.

[Operator]

Our next question comes from Paul Matteis with Stifel.

[Paul Matteis, analyst]

I just wanted to clarify to Phil's question were there any kind of one-off benefits this quarter either from inventory or net price tracking better than expected? And then on the focal program, as we get close to data here, I just want to ask an open question, like how excited are you about this asset? And how do you think about the criteria, not just for what's a win in the study? Like is it p-value driven? Or is it more qualitative? And then what's the criteria for not just moving this forward, but taking it forward right into a Phase III?

[Unknown Executive]

Paul, nice to hear from you. The quarter was very, very clean, nice underlying growth, nothing significant to note on inventory. So really reflects both the LTC site, neuro team, really doing an excellent job continuing to drive diagnosis and getting patients treated with INGREZZA. So overall, a very good quarter sets us up nicely for the rest of the year and heading into 2024. Eiry? .

[Eiry Roberts, executive]

Paul, first thing to that, we remain on track to be able to release the data from the focuses study for 352 in this quarter. And we're very excited about the asset in terms of the potential benefit that it can bring for patients with focal onset seizures. It's obviously, as you know, a NAV1.6 selective agent. This study, however, is proof of concept study. So it is a dose-finding initial study in focal onset seizure patients who have an inadequate response up to 3 other treatments. But we obviously will be looking at the reduction in seizure frequency that we can see in the context of this program on this molecule. And I think it is necessary in the face of the [indiscernible] to be setting the bar high. We haven't talked specifically about targets there, given that this is a proof-of-concept study, but we'd want to see a robust efficacy signal. And based on the what we understand about this mechanism and the selectivity, obviously, how that relates in terms of tolerability is going to be important in our decision-making as well.

[Operator]

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

[Tazeen Ahmad, analyst]

A couple of questions from me. Eiry, just to clarify, so you will be showing data on seizure freedom for the focal onset seizure update. I just want to make sure that, that's going to be part of the top line. And then secondly, as you think about the opportunity in Huntington's, I know that this year's guide does not include very much contribution. But in the grand scheme of things, how big of an opportunity for INGREZZA do you expect it to be in chorea.

[Eiry Roberts, executive]

Thanks, Tazeen. With this concept study, the primary input of the study is actually tolerability and safety, but we will be reporting out issues related to seizures frequency as well. So both in terms of reduction in overall seizure frequency, percentage of patients getting to a 50% reduction and also any information we have around seizure [indiscernible].

[Tazeen Ahmad, analyst]

Okay. And how many patients worth of data would that be? .

[Eiry Roberts, executive]

It's 100 patients, but there are 4 dose levels, 3 active and 1 placebo group in the study.

[Tazeen Ahmad, analyst]

Okay. And then on the Huntington ?

[Eric Benevich, executive]

Yes, I'll tackle that question. So on a relative basis, the Huntington's opportunity obviously is smaller than TD. We estimate the addressable population of people living with Huntington's disease and chorea around 20% to 25%, currently only about 20% get treated with a VMAT2 inhibitor. And so while there is a significant opportunity to make a difference in that patient population and to increase the treatment rate especially on a relative basis, it's still a smaller commercial opportunity than TD and TD is going to continue to be our growth driver going into the future.

[Operator]

Question comes from Brian Abrahams with RBC Capital Markets.

[Brian Abrahams, analyst]

So just maybe continuing on Hunt's. Can you maybe talk a little bit about the initial dynamics that you're seeing and maybe expand on those in terms of de novo patients versus switchers? and segments where you're seeing or expecting to see the most uptake there? And then secondarily, on the use of capital, it sounds like your primary focus remains on INGREZZA commercial growth and investment and focusing on the internal pipeline, but maybe you can just give us an update on your latest thinking on any sort of external collaborations or other strategic opportunities outside of Neurocrine in the past, you've been -- you've kind of talked about the optionality that your balance sheet might give you there. Curious your latest views?

[Unknown Executive]

Brian, so when it comes to use of capital, I don't think there's been any dramatic changes in our strategy, and it's worked out quite well for us. We're going to, first and foremost, is to invest in INGREZZA and continue to bring this drug to as many as possible. And that's why you see this continued very good growth. Second, what we're doing, as you can see and as we'll be discussing at some length in our R&D Day, is the investment in ourselves from a research standpoint and that's going to be our transition of a company into multiple therapeutic modalities in the areas that we concentrate on, which is neuroscience, neuropsychiatry, neuroendocrinology and at some point in the very near future, neuroimmunology. And then finally, focusing on the pipeline that we currently have here. We have a number of readouts this quarter and into next year. We're going to continue to invest in those products and not probably what we will be investing in is going to be the submission for crinecerfont next year. Getting ready for what we believe is going to be an ADCOM for the drug since it's a first therapy for these patients since 60 plus years and then ultimately knock on with the launch. So there's our priorities, there's our use of capital.

[Eric Benevich, executive]

Yes. And I can comment on the question around patient types in Huntington's chorea. So this is an opportunity that is primarily going to be driven through our neurology sales force. And they're calling on the centers of excellence for Huntington's disease, movement specialists as well as general neurologists that treat these patients. If you think about the dynamics that I described earlier with only about 20% of the eligible patient population currently being treated with the VMAT2 inhibitor. About half the time, you're not getting treated with anything in about 1/3 of the time roughly are getting treated with antipsychotics primarily for and secondarily to help potentially improve the movements. So the feedback we're getting so far is very positive. And as I mentioned earlier, it's very early days yet. But if you think about the types of patients that would be getting started on INGREZZA here at the outset of our launch. Obviously, de novo patients that are newly diagnosed with chorea. Certainly, patients that have, for various reasons in the past, declined treatment and as I said, that's really the majority of the addressable patient pool. And then there are some patients that have tried and for whatever reason, have responded well to tetrabenazine or deutetrabenazine either they didn't tolerate them or they weren't able to achieve an effective maintenance dose. So these are all patient types that would be considered candidates for treatment with INGREZZA. The one group that we're not pushing for really is patients that are currently doing well on treatment. So I think that there's a lot of growth opportunity within this new indication and we're excited to make a difference here in the coming months and years.

[Operator]

Your next question comes from Akash Tewari with Jefferies.

[Akash Tewari, analyst]

This has[indiscernible] on for Akash. Now that you have both data sets for crinecerfont, which population pediatric or adults will be the larger sales opportunity? And what should we be modeling for duration of [indiscernible]

[Eiry Roberts, executive]

Let me start. So in terms of the programs reading out, we believe that the unmet need is significant in both pediatric and adult patients with crinecerfont. As Kevin alluded to, there has been no new medication in terms of medication types that are nonsteroid related for this patient population for the last 60, 70 years. And so we do believe, based on the strength and quality of the data that we've generated in this program that there is an opportunity for crinecerfont, if approved, to fundamentally change the treatment paradigm for these patients. And so I think that we will be focused on reaching every patient that we can, both in the adult and the pediatric setting. And our educational processes and support of both the clinicians, patients and caregivers will actually fall in both of those areas.

[Matthew Abernethy, executive]

So given the safety profile that we saw as well as the efficacy, this is something that we would expect to be chronic treatment that a patient would get on -- we would expect them to see the [indiscernible] control and the benefit and should be safe to have as chronic treatment, but data will show that out.

[Eiry Roberts, executive]

And just to support that, we obviously have ongoing open-label data that is generating additional safety information several years worth of data now in many patients. And I think the goal would be to allow the flexibility of using this medication in a chronic way if approved.

[Operator]

Question comes from Joshua Schimmer with Cantor.

[Joshua Schimmer, analyst]

Congrats on a very strong quarter. On INGREZZA, I think in the past, even earlier this year, you indicated that the long-term care facility effort was still just off the ground. I think on this quarter, you indicated that there was good momentum in that segment. Can you talk a little bit about the dynamics there and what's transpired over the course of the last year and whether that is starting to become a more meaningful contributor to revenue? .

[Eric Benevich, executive]

Yes. I do think it's a meaningful contributor to revenue and it's certainly growing well, as I mentioned earlier. Certainly, I think that going into this year, remember that we just launched our LTC sales force in the spring of 2022. And so we're about 1.5 years into this effort. And really, the first few quarters were driving towards getting our targeting down laying the foundation for TD in that space. Remember that this is essentially new in long-term care. And so our team has done a really nice job, I think, of educating the care teams in the long-term care facilities, understanding the dynamics with LTC pharmacies and have done a nice job of really driving diagnosis and now treatment with INGREZZA in the long-term care segment. So as I mentioned before, it's growing nicely, and it's really part of the reason that we've had such a nice Q3.

[Operator]

Question comes from Carter Gould with Barclays.

[Carter L. Gould, analyst]

This is Leon on for Carter. Congrats on a great quarter. Our question just relating to CAH. Wondering would be an appropriate medical meeting to share the data. Essentially, do we -- should we expect this maybe around middle of the year, perhaps end though or could we see this publication publish ahead of time? .

[Eiry Roberts, executive]

Yes. A couple of comments on that. First of all, when we shared the data a month or so ago now, we showed probably approximately 5% or less than 10% of the information that we were generating. And so right now, we're working on pulling together all of the remaining information [indiscernible] all the data that we generated. And then our goal will be pull that together for publication and presentation as rapidly as possible in parallel, obviously, with preparing for the NDA submission, which we will do next year. And so I think the key -- the key meetings in the endo space include endo that you alluded to, together with additional pediatric meetings in both the U.S. and in Europe. Most of those fall from around April time next year. And those are most likely to be the meetings that we would be targeting for presentation with a full publication running in parallel with that.

[Operator]

Our next question comes from Anupam Rama with JPMorgan.

[Anupam Rama, analyst]

Congrats on the quarter. So while you guys didn't preannounce 4Q INGREZZA sales or provide forward year guidance last year at the JPMorgan Healthcare Conference. You have taken this strategy in the past. So just wondering what we should be expecting this year in terms of the conference.

[Matthew Abernethy, executive]

Anupam, nice to hear from you. You should expect similar to last year that we're not going to be providing a Q4 update from an INGREZZA sales perspective at the JPMorgan conference in January. And we'll be providing that information during our February earnings call, where we'll provide a full financial picture including INGREZZA sales guidance, Q4 performance and what we expect for 2024. But we are looking forward to seeing you and spending time with you and covering a lot of ongoing associated with our pipeline.

[Operator]

Question comes from Jay Olson was Oppenheimer.

[Jay Olson, analyst]

Congrats on another inflative quarter. Could you talk about life cycle management plans for INGREZZA, especially since you settled with Teva and Sanofi for 2040 and you currently have 2 new indications in clinical development. Are there additional new indications you might pursue for INGREZZA considering the runway, which could go well beyond consensus estimates? .

[Eiry Roberts, executive]

Thanks, Jay. We continue to look at opportunities for INGREZZA in serving different patient groups on an ongoing basis, both from the insights that we gain from our medical team out in the field and also obviously in the clinical development setting. However, at the moment, given the breadth of everything else that we have going on in our pipeline, we are focused on two key indications, as you mentioned, which is adjunctive treatment of schizophrenia, and dyskinetic cerebral palsy. And we've focused on those 2 given that they have the highest likelihood of being successful taking dyskinetic cerebral palsy [indiscernible]. I think in the context of the really strong data that we generated both in target dyskinesia and now in the chorea Huntington, with dyskinetic cerebral palsy being the most common childhood movement disorder in the United States.

We believe it was appropriate for us to be pursuing an indication in that setting. And we have a Phase III program currently ongoing both in the U.S. and outside the U.S. And then for adjunctive treatment of schizophrenia, it was a combination of 3 things that drove us to that indication. The first was obviously the very key safety and tolerability program profile that we had for INGREZZA in patients with schizophrenia already from our target dyskinesia experience. Secondly, with some preclinical data that we had showing potential adjunctive therapy might be beneficial from an additive or synergistic perspective on efficacy. And then thirdly, obviously, what we were hearing from the field. So we are focused on those programs right now and getting to data as rapidly as possible in each of those, but we do continue to look at other opportunities, obviously, on an ongoing basis.

[Kevin Gorman, executive]

And what I would add to that is that, as we said, we've got a long runway with this medication. We feel confident in our patent position out to at least mid-2030s. And as you've seen that with our end of negotiations with 2 of the 4 parties, we settled into the late 2030s with them. So the only other thing I would add is that while INGREZZA, as I said, a very long runway still left to it. Our research group is highly focused on maintaining our leadership in movement disorders and in tardive dyskinesia.

[Operator]

Your next question comes from Brian Skorney with Baird.

[Brian Skorney, analyst]

This is Charlie on for Brian. So I wanted to ask about the anhedonia asset, which I believe you are still on track to give us data in the fourth quarter. What exactly should we be looking at in terms of the clinical bar here and what data have you generated so far that gives you confidence in this asset that it's differentiated from previous assets that have struggled to get a strong efficacy signal?.

[Eiry Roberts, executive]

So yes, we are on track to read out the data from this anhedonia Phase II study in this quarter. This is actually an [indiscernible] GPCR GPR-139 molecule. So although we understand a great deal about the biology of where this target is a confidence around the potential use in anhedonia. Obviously, there's been very little research that's been successful in the field of anhedonia. And it's a very difficult symptom set within the range of symptoms experienced by patients with major depressive disorder.

And so in that context, this proof-of-concept initial study in Phase II in 88 patients is focused not only on looking at the potential impact of 846 on the anhedonia skills themselves, the [indiscernible] scales but also on the depression scales. And so we will be interested when we read out the data to understand whether 846,000 antidepressive effect alone or whether that effect is predominantly on the scales of anhedonia. In terms of setting a bar, this is a proof-of-concept signal-seeking study we will be looking at the totality of the data, both from an efficacy and safety perspective, and we look forward to sharing the information when we have it available.

[Operator]

Your next question comes from Marc Goodman with Leerink Partners.

[Marc Goodman, analyst]

Matt, can you talk about SG&A leverage into 2024? I mean given that [indiscernible] going to be 2025 event. I was just curious how much leverage we should be expecting there. And are you still kind of guiding us to the R&D at 30% level ?.

[Matthew Abernethy, executive]

Yes. From an SG&A perspective, you can see this year that we drove around 300 basis points of leverage and a testament to the investments we're making and how the sales team continues to drive INGREZZA sales growth. We'll clearly be investing behind CAH next year to prepare for a potential launch of the medication. And as you mentioned, most likely revenue starting in 2025. So that will put a little bit of pressure on our SG&A leverage, but I would say that you should anticipate some healthy SG&A leverage next year and we'll provide more specifics when we get to our February earnings call. On the R&D front, yes, as we've said before, around 30% spending on R&D is what we're thinking from a capital allocation perspective. But that is really dependent upon having quality assets in those that we think can make a difference for patients and then ultimately for our shareholders, and we'll be providing more insight on some of those investments that we're making during our R&D Day in early December.

[Operator]

Our next question comes from Jeffrey Hung with Morgan Stanley.

[Lee Hung, analyst]

This is Michael [indiscernible] Reed on for Jeff Hung. Could you walk us through the NBI-570 M1/M4 dual agonist in the recent Phase I? I guess I just wanted to touch on what makes it selective for CNS or maybe what are the differentiated strength versus [indiscernible] like 5, 6, 8.

[Eiry Roberts, executive]

Yes. Thanks, Michael. So obviously, we just initiated our Phase I clinical program on 570, and we're very excited to be able to take the second of our portfolio of muscarinic agonist into the clinic. So we don't have clinical data as yet, obviously, on this asset, but it was successful in navigating toxicology preclinical and all of the biology necessary to enter the clinic. I mean I think we feel very strongly that the muscarinic agonist approach in treating both neuropsychiatric and potential neurological conditions, including those impacted by cognition, would actually provide a very broad set of opportunities for patients moving forward and in that regard, although obviously, our M4 selective 568 agent is targeted very directly to treating psychosis in schizophrenia, and that M4 mechanism is now validated in the clinic with both [indiscernible] assets. There is still a lot of room beyond M4 agonism alone to add potential value for patients. And so in this first, we are taking M1 and M4 selectivity with a view to being able to broaden the range of indications that could be considered for this drug into those impacting cognition as well as the psychosis-related indications that we've already studied.

[Operator]

Our next question comes from Myles Minter with William Blair.

[Myles Minter, analyst]

I think you've previously mentioned that the longer facility [indiscernible] opportunity is an additional 10% to 15% of the market. Seems like you are penetrating better than you previously expected into that market. So was that additional TAM expectation changed at all from that 10% to 15% number? .

[Eric Benevich, executive]

Our estimate is that approximately 10% to 15% of people living with TD are currently living in long-term care facilities. And as I mentioned, we just launched into that segment last year. So on a relative basis, it's less developed, let's say, than the psychiatry or the neurology segments where we've been for 6-plus years. But we are growing nicely. I wouldn't say that it's exceeding expectations. We always had high expectations for the opportunity in LTC and the team is doing a great job on delivering on those expectations.

[Operator]

Our next question comes from Yatin Suneja with Guggenheim Partners.

[Yatin Suneja, analyst]

Just a clarification on the FOS study. I think in the past, you have sort of articulated that you would like to see about the seizure reduction of about 15% in placebo to 30% in the [indiscernible] basically implying doubling of the effect, but today you sort of shy away from putting those numbers, but did say that the bar is high or the efficacy should be robust. So I'm just curious like what is -- what do you mean by robust? Is it close to 50%? Or is 30%? Any color that you can provide would be helpful?.

[Eiry Roberts, executive]

Yes, a placebo rate of 15% with an active treatment of 30 is about what's been seen with some other therapies. That would be at the top end of the range with recent trial readouts. And so I think that's a reasonable bar. This is a proof-of-concept study, though. And so it's our first Phase II study, and we will be looking beyond just that seizure reduction frequency into other elements of the data to understand just how robust the information is. Also, very importantly, in the context of this selective mechanism is the tolerability and safety profile. And because at the end of the day, we're aiming for an improvement in benefit risk for these individuals.

[Operator]

Our next question comes from Laura Chico with Wedbush Securities.

[Laura Chico, analyst]

Just one on INGREZZA. Has the duration on treatment continued to grow at this point. And then related to that, what are your assumptions on continued growth of antipsychotic usage going forward? .

[Eric Benevich, executive]

I didn't catch the first part of your question about treatment. Can you repeat that? .

[Laura Chico, analyst]

Sure. Is the duration of treatment on INGREZZA continuing to expand at this point?.

[Eric Benevich, executive]

Yes. We've had -- we've been very fortunate with INGREZZA really since the early days of the launch that we had very good persistency and compliance. And the rates of persistency of compliance have been quite steady from the early days of the launch through -- really through 2023. And so we're not seeing any big changes there, but they were already quite high to begin with. So I think that's one of the drivers for continued growth of INGREZZA.

[Operator]

Next question comes from Sumant Kulkarni with Canaccord.

[Sumant Kulkarni, analyst]

So assuming all goes well on [indiscernible] approval for crinecerfont and CH, how do you expect that market to play out perhaps a couple of years after you've launched in the U.S. And is there anything that precludes the use of a CRF1 receptor antagonist in combination with an ACTH antagonist, for example.

[Eiry Roberts, executive]

Yes, I can't really comment on the market, and maybe Eric might want to make a comment there. With respect to the second part of your question, though, I mean, that combination has not been studied together and that would need to happen before we can make any comment on clinical implication of combined therapy [indiscernible] action would be somewhat similar in terms of the direct reduction of androgen for both an ACTH inhibitor and the CRF1 antagonist. And I think what we've seen so far in our data is that treatment with crinecerfont can result in a very substantial and clinically relevant reduction in androgens alone. And so I think in the context of need for combination [Technical Difficulties – Please refer to the preliminary transcript that will be posted shortly.]