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Edited Transcript of NBIX earnings conference call or presentation 5-Feb-19 9:30pm GMT

Q4 2018 Neurocrine Biosciences Inc Earnings Call

San Diego Feb 21, 2019 (Thomson StreetEvents) -- Edited Transcript of Neurocrine Biosciences Inc earnings conference call or presentation Tuesday, February 5, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Eiry Wyn Roberts

Neurocrine Biosciences, Inc. - Chief Medical Officer

* Eric S. Benevich

Neurocrine Biosciences, Inc. - Chief Commercial Officer

* Jane Sorensen

Neurocrine Biosciences, Inc. - Head of IR

* Kevin C. Gorman

Neurocrine Biosciences, Inc. - CEO & Director

* Kyle Gano

Neurocrine Biosciences, Inc. - Chief Business Development Officer

* Matthew C. Abernethy

Neurocrine Biosciences, Inc. - CFO

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Conference Call Participants

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* Benjamin Jay Burnett

Stifel, Nicolaus & Company, Incorporated, Research Division - Associate

* Biren N. Amin

Jefferies LLC, Research Division - MD and Senior Equity Research Analyst

* Charles Cliff Duncan

Cantor Fitzgerald & Co., Research Division - Senior Analyst

* David A. Amsellem

Piper Jaffray Companies, Research Division - MD and Senior Research Analyst

* Jay Olson

Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst

* Jeff Hung

Morgan Stanley, Research Division - Equity Analyst

* Paul Choi

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Laura Christianson

Cowen and Company, LLC, Research Division - Research Associate

* Marc Harold Goodman

SVB Leerink LLC, Research Division - MD of Neuroscience & Senior Research Analyst

* Tazeen Ahmad

BofA Merrill Lynch, Research Division - VP

* Tessa Thomas Romero

JP Morgan Chase & Co, Research Division - Analyst

* Trevor S. Brown

Robert W. Baird & Co. Incorporated, Research Division - Research Analyst

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Presentation

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Operator [1]

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Good day, everyone, and welcome to Neurocrine Biosciences Reports Fourth Quarter and Year-end 2018 Results. (Operator Instructions) Please note, today's call is being recorded. (Operator Instructions)

It is now my pleasure to turn the conference over to Kevin Gorman, CEO. Please go ahead.

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Kevin C. Gorman, Neurocrine Biosciences, Inc. - CEO & Director [2]

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Thank you very much, operator, and welcome everyone to our Q4 earnings call. I'm joined in the room today by Matt Abernethy, our CFO; Eiry Roberts, our CMO; Eric Benevich, our Chief Commercial Officer; and Kyle Gano, our Chief Business Development Officer.

Before we get started, Jane, could you please read our safe harbor.

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Jane Sorensen, Neurocrine Biosciences, Inc. - Head of IR [3]

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Yes. Certain statements made in the course of this conference call that are not historical statements may be forward-looking statements, which are subject to risks and uncertainties. Information concerning factors that could cause actual results to differ materially from those contained in or implied by the forward-looking statements, is contained in the company's SEC filings, including, but not limited to, the company's third quarter 2018 Form 10-Q and in today's press release.

Copies may be obtained by visiting the Investor Relations page on the company's website. Any forward-looking statements are made only as of today's date and we disclaim any obligation to update these forward-looking statements. Kevin?

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Kevin C. Gorman, Neurocrine Biosciences, Inc. - CEO & Director [4]

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Thank you very much. Hard to believe we're just in the beginning of February. It seems like there's been so much going on, both in the company and in our industry in just the very first 5 weeks of this year. I'd like to take this opportunity as we normally do in this Q4 earnings call to look back at the accomplishments of the company in 2018, and it really was a very, very good year for us.

Once again, we saw INGREZZA offering tremendous benefit to patients and its widespread acceptance by the medical community, and that's resulted in over $400 million of sales in its first full year on the market. We're also very pleased to see that ORILISSA was launched by our partner AbbVie. And then third, our research group added 2 more compounds into the clinic, and one of those being a new VMAT2 inhibitor.

And we also finished the year with over $800 million in cash. Now that cash was important because that allowed us to invest in our business. And when you look at 2018, we invested heavily in INGREZZA, expanding not only our sales force and sales management, but all of our field teams; medical scientist liaisons, national account teams and patient access specialists. We recognized that the opportunity to treat TD patients was great and that the educational effort was equally large. We expect to see the benefit of the sales force expansion over the coming quarters.

But our investments didn't stop there. We also began the expansion of our research, preclinical development, manufacturing and clinical groups in 2018. These are the teams that discovered and developed INGREZZA and ORILISSA. Our investment will continue to add to the unique discovery platform that we've developed at Neurocrine over the past 10 years. We work to expand our small molecule capabilities, not just internally, but also externally.

An example of this is our recent collaboration with Jnana pharmaceuticals to discover small molecules targeting CNS soluble carrier transporters. These are very important mediators in the CNS. However, historically, they've been extremely difficult to drug, but we think Jnana's technology is compelling.

We have numerous academic and industrial collaborations that don't make the news, but are of great value as it allows us to partner with some of the leading labs in the world to share expertise and technology to identify and validate novel targets in neurological diseases.

Now in 2019, we will continue to invest in our science and in our patients. We will continue the expansion of our R&D groups to allow us to work on more programs simultaneously, thus increasing our chances of success in bringing novel medications to the clinic.

We're also investing in our TD patients with the launch of our nationwide unbranded educational television and Internet campaign. The goal of this campaign is to help patients and their family members engage their health care professionals if they are experiencing involuntary movements.

And in addition, we're going to continue in earnest our educational initiatives with physicians and Allied Health professionals to facilitate recognition and appropriate diagnosis of tardive dyskinesia. We will also continue our preclinical and clinical activities to expand the indications addressable by both valbenazine and the new VMAT2 inhibitor we introduced in the clinic.

Now while investing in our historical areas of strength, small molecule drug development, we understand that there are targets that can change the course of neurological diseases or even be potentially curative. These targets have been on our radar for years, but they are not amenable to small drug development. Two of those are Parkinson's disease and Friedreich's ataxia.

We have surveyed the landscape of new therapeutic modalities and technologies for years, and Kyle can talk about that later on. We've watched a number of exciting young companies as they've grown and matured.

Last month, we entered into an extensive and deep collaboration with Voyager, a company that we believe has the best technology and expertise in gene therapy for CNS diseases and disorders. We're very excited to begin this collaboration to bring forward their existing programs and 2 more targets that we will select. This will build on the expertise that Neurocrine has in neuropsychiatry, neurology and neuroendocrinology.

In 2019, we anticipate significant progress with our pipeline. First, later this quarter, we will be releasing initial results of our congenital adrenal hyperplasia trial, and Eiry will be discussing this in a moment.

Second, we are on track to submit the NDA for opicapone for the treatment of Parkinson's disease next quarter. We've begun the pre-commercialization work to be launched-ready next year.

And third, our partner AbbVie plans on submitting elagolix for the treatment of uterine fibroids later this year. This is going to be a very full and busy year for the company.

So at this point, I'd like to turn the call over to Matt, so he can go over our quarter and full year financials. Matt?

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Matthew C. Abernethy, Neurocrine Biosciences, Inc. - CFO [5]

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Good afternoon, and thank you for joining our fourth quarter 2018 earnings conference call. As highlighted in our preliminary sales announcement in early January, our fourth quarter sales activity reflects the continued momentum of our INGREZZA launch, adoption by patients and physicians, and caps off a significant 2018 for Neurocrine Biosciences.

During the fourth quarter of 2018, INGREZZA saw script volume increase to approximately 22,900 scripts, resulting in $130.3 million in net product sales. This compares to 19,400 scripts and $111.3 million in net product sales for the third quarter of 2018.

For the full year 2018, INGREZZA net product sales were $409.6 million compared to $116.6 million for 2017. The increase of 3,500 prescriptions from Q3 to Q4 reflects continued strong demand for INGREZZA, with increasing new patient flow and overall steady adherence rates. From an inventory perspective, we did not see any significant stocking activity leading to an overall material increase on days on hand inventory within our channel.

Net revenue per script for Q4 was fairly consistent with Q3, around $5,700 per script, reflecting a 4% price increase introduced in early December, offset by incremental accounting reserves taken associated with year-end channel inventory. As we look forward to Q1 2019, we expect there to be a more significant impact to our gross to net as a result of the Medicare Part D donut hole in commercial co-pay assistance. We estimate the impact will be between $6 million to $8 million comparing Q4 2018 results versus our expectations for Q1 2019.

Moving now to our financial results for the fourth quarter of 2018. During the quarter, we recognized a profit of $18.1 million or $0.19 earnings per diluted share. Our operating expenses increased to $109.6 million during the fourth quarter due to our field sales team expansion.

Regarding cash investments, we are exiting 2018 with $866.9 million, which is sufficient capital to execute our near-term strategy, including covering the $165 million upfront payment for the recently announced Voyager Therapeutics collaboration, which we expect to close during the first quarter.

Now on to a few comments about our 2019 revenue outlook. Specific to the first quarter of 2019, we expect continued growth of INGREZZA TRx, but do expect some impact on net revenue as a result of seasonal factors that impact demand across our industry. In addition, as I mentioned earlier, we expect there to be a $6 million to $8 million impact comparing Q4 2018 to Q1 2019 as a result of the gross to net impact from Medicare Part D donut hole in commercial co-pay reset.

For 2019, our priority is very clear for INGREZZA, increase the number of patients diagnosed with TD and provide patients with INGREZZA to alleviate the often debilitating symptoms that come with having TD. Our expanded sales team and our recently announced Talk About TD disease state awareness campaign, aims to help patients and caregivers understand TD and have a conversation with their health care providers about ways to manage their TD.

We do expect continued growth throughout 2019, but expect there will be natural ebbs and flows quarter-to-quarter as you would expect in a market building activity like this. We would also expect quarter-to-quarter results to be influenced by seasonal dynamics and natural progression of long-term patient compliance.

Looking back on 2018, we are quite proud of achieving over $400 million in INGREZZA sales, and the positive impact on patients during our first full year of launch. We look forward to benefiting more patients as our launch continues throughout 2019.

Regarding SG&A and R&D expenses. As announced in our press release, we expect our expenses for 2019 to be in the range of $550 million to $600 million, including approximately $80 million of share-based compensation. Specific to the recently announced Voyager Therapeutics collaboration, our expense guidance range includes $40 million to $50 million of estimated operational cost for 2019, but excludes the expense impact from $165 million upfront payment due upon closing.

Specific to SG&A and operating expenses for 2019, we're making investments to position us for long-term commercial success, including a recent sales force expansion, our Talk About TD educational awareness campaign and a pick up on marketing investments to prepare for anticipated 2020 launch.

Moving to R&D. We see significant opportunities to enhance our pipeline and advance our current programs to drive long-term value for patients and investors. Our increased investment in R&D in 2019 includes advancing our CAH program, assuming positive results from our study; completing our opicapone NDA submission, which will result in a $10 million milestone payment to be out; and making progress on our early clinical stage programs.

In addition, we have planned increased investment in INGREZZA surrounding our Phase IV studies, health economics outcomes research, investigator initiated trials and other clinical development programs to expand the impact of valbenazine for patients.

In regards to our T-Force PLATINUM study, we have not made a formal decision whether to continue this study or not. Should we choose to discontinue the study, we would expect our operating expenses to fall towards the bottom half of our spending guidance range. We expect 2019 to be another year of tremendous progress, helping many more patients impacted by TD and advancing medicines, which are important to helping those with significant unmet clinical needs.

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

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Eiry Wyn Roberts, Neurocrine Biosciences, Inc. - Chief Medical Officer [6]

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Thank you, Matt, and good afternoon to everyone on the call. I'm pleased to provide an update on our clinical pipeline and a few thoughts on the programs associated with our collaboration with Voyager Therapeutics.

As part of our extensive medical educational program and ongoing commitment to support patients with tardive dyskinesia, we continue to collect important data from the ongoing real-world study called RE-KINECT. RE-KINECT is the largest real-world screening study of patients with possible TD. One year follow-up for patients included in the study was recently completed, and we intend to present data in Q3 of this year. Additional data, including an in-depth analysis of quality of life impact and an assessment of the burden placed on caregivers will also be included in upcoming publications.

For valbenazine in pediatric patients with Tourette's syndrome, as previously announced, the T-Force GOLD study did not meet its primary endpoint. We are currently analyzing the complete dataset from this recently completed study and intend to make a decision regarding next steps for the clinical development program in this indication later this quarter.

For opicapone, we continue to make excellent progress in completing the NDA package and remain on track for a submission to the FDA in Q2 2019. For CAH, the Phase II proof-of-concept study examining the pharmacokinetics, pharmacodynamics and tolerability of NBI-74788 in adult patients with classic 21-hydroxylase deficiency continues to progress. We anticipate sharing initial results for this compound later this quarter.

In the event of positive results, we plan to meet with the FDA to discuss the path forward for the evaluation of NBI-74788 as a novel treatment for patients with classic congenital adrenal hyperplasia. In addition, we are working to initiate clinical development in pediatric patients with CAH later this year.

Turning now to our novel internally discovered Vesicular Mono-Amine Transporter 2, VMAT2 inhibitor with potential for use in the treatment of a range of neuroscience disorders. We recently completed dosing in the single ascending dose portion of our first Phase I study for this compound and successfully initiated dosing in the multiple ascending dose portion of the same study. This study is designed to assess safety, tolerability and pharmacokinetics of the compound in healthy subjects. We anticipate that dosing in the study will be complete in Q2 2019.

As you can see, we continue to make progress with our clinical programs here at Neurocrine Biosciences. Now let me share with you a few thoughts around our collaboration with Voyager Therapeutics. We are excited to engage in this partnership with Voyager to advance the Parkinson's disease, Friedreich's ataxia and 2 other gene therapy-based programs. These programs are all targeted to disease states where gene therapy has a real opportunity to make a difference in providing much needed treatment options for people with serious neurological diseases.

Voyager Therapeutics has extensive experience in the field of gene therapy and I believe that the scientific rationale for their programs in both Parkinson's disease and Friedreich's ataxia is very strong. In addition, I'm confident that Voyager scientific expertise, coupled with Neurocrine's clinical development, regulatory and commercial capabilities will result in the effective advancement of these programs over the coming years.

We're currently jumping into these programs with our partner to learn more and create formal development plans. We look forward to providing program updates in the coming quarters as these plans and activities develop. 2019 will be a very exciting year for Neurocrine and our clinical development program, and I look forward to keeping you updated.

With that, I will now hand the call back over to Kevin for some closing remarks.

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Kevin C. Gorman, Neurocrine Biosciences, Inc. - CEO & Director [7]

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Thank you very much, Eiry. So those are our introductory statements. What I'd like to do is open it up for your questions now, please.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Brian Skorney with Baird.

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Trevor S. Brown, Robert W. Baird & Co. Incorporated, Research Division - Research Analyst [2]

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This is Trevor on for Brian. So just relating to your guidance, we're curious why you haven't provided guidance for INGREZZA sales for the coming year? And what sort of factors would go into providing you with enough confidence to provide us a range?

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Matthew C. Abernethy, Neurocrine Biosciences, Inc. - CFO [3]

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Yes, no, excellent question. And as a company where we have landed is to not provide revenue guidance at this time. We're very focused on the launch of INGREZZA and really bridging that gap between the prevalent population and the diagnosed population.

There's still many things to be understood with the launch and we're focused on INGREZZA from a long-term perspective. So we will be providing qualitative quarter-to-quarter color, but right now, where we've landed is not to provide guidance from a revenue perspective at this time.

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Operator [4]

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

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [5]

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On the brand for INGREZZA, Kevin, you've talked in detail in the past about how you feel you're still in the early innings of this launch. You've talked to us about some factors that could help give us color on how to model the year for 2019, but as mentioned, you haven't provided sales guidance.

So how are you thinking about the tenor of the launch this year maybe relative to last year? Obviously, you came up well above expectations, but is there anything that could potentially change the cadence of this launch this year given that you're still early, so there's still a lot of patients that could go on therapy?

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Kevin C. Gorman, Neurocrine Biosciences, Inc. - CEO & Director [6]

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Yes, Tazeen, I'll give you a little bit of my thoughts, and I'm going to turn your question over to Eric then to answer a little bit more. I don't see anything that is going to stand in our way in 2019 in order to continue to bring the drug to patients.

What we continue to experience in the market is something that we've had from day one. And it's that dramatic gap that's between the prevalent population and the diagnosed population. And that's really what we need to tackle in this market in 2019, just as it was in 2018 and 2017. Eric, what would you like to add?

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Eric S. Benevich, Neurocrine Biosciences, Inc. - Chief Commercial Officer [7]

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Thanks for the question, Tazeen. So I'll start by saying we feel really good about our position as we enter 2019. And as a commercial team, our focus remains on executing our plan.

As Kevin said, the vast majority of TD patients remain undiagnosed. And therefore, we continue to invest in TD disease state education to really improve recognition and appropriate diagnosis. And so we're going to continue to also leverage the clinical data that we've been developing, and Eiry touched on the RE-KINECT study and the long-term follow-up data that will be coming this year.

And furthermore, really being able to see the benefit of our recently completed sales force expansion. So all of those factors make us feel good about the growth prospects. Kevin said, and I believe, Matt said in his comments that growth will likely vary from quarter-to-quarter. We've seen that over the course of this launch, but it's still early days yet. The vast majority of these patients are undiagnosed, and we're very focused on building this market, and we continue to be very optimistic about 2019.

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [8]

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Okay. And as a follow-up, any kind of anecdotal data you could share with us on expectations from competition from Teva? Is it -- as it was last year, are you expecting any changes to that dynamic?

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Kevin C. Gorman, Neurocrine Biosciences, Inc. - CEO & Director [9]

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Tazeen, I think that Teva is continuing on with their plans. And it's really hard for us to talk about what they might be doing in the future.

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [10]

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Is that part of the reason why you're not issuing guidance?

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Matthew C. Abernethy, Neurocrine Biosciences, Inc. - CFO [11]

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No, no. Teva didn't have any input to us not providing guidance, Tazeen.

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Operator [12]

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Our next question comes from Paul Matteis with Stifel.

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Benjamin Jay Burnett, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [13]

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This is Ben Burnett on for Paul. I had a question about your CAH program. I guess, what do you need to see in terms of 17-OHP lowering to move this program into -- ultimately into pivotal study?

And then just secondly, I guess, do you have a sense at this point in the game as to what primary endpoints would ultimately be approvable? Would 17-OHP be enough in its own right, or would you also consider things like the level of steroid sparing? Love to hear your thoughts on that?

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Eiry Wyn Roberts, Neurocrine Biosciences, Inc. - Chief Medical Officer [14]

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Thanks for the question, and very happy to provide a little bit more color there. I think we have stated before, and very consistently believe that the best thing for us to look at in terms of understanding the data from this current ongoing proof-of-concept study is to really refer back to a study that we performed some years ago, which was a single dose study with a different CRF1 antagonist.

And in that study, of the single doses of the compound administered to female subjects, we saw about a 50% reduction in 17-hydroxy-Progesterone levels after that single dose in about 50% of the population. And so that will be our starting point and what we're thinking about going into as we look at these data.

Having said that, however, we know that there are a significantly broader number of biomarkers that are important in the disease as CAH. And so in addition to the 17-hydroxy-Progesterone levels, in our study we'll be looking at androgen levels, ACTH and other markers. And we'll be looking at those markers in totality in terms of the data to understand the PK/PD relationship for the medication more broadly.

In terms of the discussion with the agency and our next steps towards a pivotal program, pending obviously the outcome of the ongoing study currently, the biomarkers are really a very, very fundamental way in which physicians manage this disease in patients. And as you know, it's a lifelong disorder, and as a result, we believe that a pivotal program that is built on the significant foundation of looking at biomarkers will be critical and will be the fundamental core of any program moving forward.

That said, efforts such as the trial designs that would allow us to look at steroid optimization and the ability to return glucocorticoid treatment back to more physiological levels in these patients without seeing an increase in androgen levels, obviously, is very important and something we'll be considering.

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Operator [15]

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Our next question comes from Biren Amin with Jefferies.

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Biren N. Amin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [16]

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Can you just talk a little bit about the seasonal impact in Q1 that you're expecting? I think it's exclusive of a donut hole impact? And how much of this impact was experienced in 2018? Can you just quantify that for us for last year?

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Matthew C. Abernethy, Neurocrine Biosciences, Inc. - CFO [17]

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Biren, this is Matt. I can take that. So one is just the impact on the gross to net, which I think we're pretty clear on that we would expect a $6 million to $8 million headwind as comparing Q1 to Q4 as a result of the reset of the commercial co-pays and then also the donut hole. And just a reminder for those who may not follow it as closely, the donut hole participation for manufacturers actually increased from 50% of the rebate to 70% in 2019.

But from a seasonal demand perspective, it's really tough bearing to tease out how much did we actually feel in Q1 of last year, because we were still early in launch. But as we've talked about before, some of the proxies that we've looked at are what happens within the long-acting injectable LAI universe.

And you see a pretty clear trend within LAIs but you have a slowdown moving from Q4 to Q1, picks back up in Q2, slows back down again in Q3 and picks back up again in Q4. And that sort of sequential deviation is around 3%-or-so when you look back over a handful of years.

So we do know there is a financial dynamic of seasonality. How much did we experience last year, how much will we experience this year, still difficult for us to tell.

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Biren N. Amin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [18]

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So, just one follow-up on that. Given you think that you're going to experience some seasonality in Q1, wouldn't that be offset by the sales force expansion that took place in the September, October time period?

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Matthew C. Abernethy, Neurocrine Biosciences, Inc. - CFO [19]

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Yes, no, Biren, that's fair. We really look forward to the impact of the sales force expansion as well as the possible benefit from our Talk About TD campaign. That does take a while for that to kick in, and Eric can maybe give an update on where we're at from our expansion perspective and how we think about that through 2019.

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Eric S. Benevich, Neurocrine Biosciences, Inc. - Chief Commercial Officer [20]

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Yes, Biren, the other thing I was going to mention in addition to those variables that impact the gross to net that Matt discussed is that in January, that's a month where a lot of plan switching happens, especially in Medicare Part D.

We've said previously that, even though we haven't given the specific numbers, that a substantial portion of patients on INGREZZA are government pay. And this is a specialty medication, and so what happens when patients switch from one Medicare Part D plan to another and they're on INGREZZA or other specialty medications, typically they're going to have to go through a reauthorization process. And so that tends to be disruptive for patients.

We do have a specialty pharmacy network and the pharmacies work with the patients and they contact them proactively to determine if they are changing plans. But bottom line is that, in addition to the donut hole impact and the reset of out-of-pocket contributions, you do have a lot of plan switching and you have some disruption in terms of timing of getting refills and things like that for those patients.

With regards to the sort of the second part of your question about the -- seeing the benefit of the sales force expansion. I think it's really happening on kind of 2 levels. One is that we have now gotten past the heavy lifting, I'd like to say, in terms of the recruiting, the training, the deployment. And it's allowed our legacy team to really refocus on calling on their accounts.

The new hires, the newer sales team members have been in the field for a few months now. And they have gotten around, they've met their customers and they're still on the steeper part of the learning curve in terms of understanding the TD opportunity and how to really sell in this market, which may be different from their prior experience.

So Kevin said earlier, that it would take a few quarters for us to see the true benefit of the expanded field sales team. But I do think that just looking at Q4, once we got past the specific expansion-related activities, we did see an uptick in terms of call activity, in terms of peer-to-peer program activity and so on, which I think were contributors to the acceleration of growth that we saw in Q4.

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Kevin C. Gorman, Neurocrine Biosciences, Inc. - CEO & Director [21]

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Yes, so the only thing I can add to this, this is Kevin, is that, this is only our second Q1 to go to. The first Q1 in 2018 that we went through was pretty early in our launch. And so there's a lot of moving parts as you've heard from Matt and Eric. And so this is one of the reasons why we hesitate to give guidance in addition, because we're going through this learning from this each and every time.

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Operator [22]

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Our next question comes from Jay Olson with Oppenheimer.

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Jay Olson, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [23]

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I was curious about your vision for the organization in terms of the Voyager deal being a worldwide deal. Does that signal Neurocrine's intention to build an integrated global organization, including ex-U. S. commercial infrastructure?

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Kevin C. Gorman, Neurocrine Biosciences, Inc. - CEO & Director [24]

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Jay, our vision for Neurocrine is to be the world-leading neuroscience company. And so in order to do that, you have to not only be dominant in the United States, but also bring your therapies to the rest of the world.

I think our -- in the more near term, our best opportunity to globalize Neurocrine comes from our CAH program. What you'll see there as we move forward is that we hope to be able to have the pivotal programs being worldwide programs. And particularly in Europe, they have approximately the same number of CAH patients and so -- as the United States.

So what we would look at is we would look at commercializing ourselves over in Europe with CAH. They have a great registry of these patients, just a handful of centers of excellence where these patients are identified, diagnosed, get them on their treatment paradigms and then send them back to their treating endocrinologists. So it wouldn't be a heavy lift for us to start a globalization of Neurocrine with that.

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Jay Olson, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [25]

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Great. And maybe just as a related question. Since you still have a strong cash position with $700 million in cash on your balance sheet, will -- should we expect Neurocrine to continue pursuing deals similar to the Voyager deal? Or are you satisfied with the current portfolio you have following this deal and your own internal pipeline assets?

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Kevin C. Gorman, Neurocrine Biosciences, Inc. - CEO & Director [26]

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Well, so I'll turn that question over to the guy who did the Voyager deal, the Jnana deal, and actually almost all the deals that Neurocrine has active right now. Kyle?

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Kyle Gano, Neurocrine Biosciences, Inc. - Chief Business Development Officer [27]

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Yes, that's a great question. I think the short answer is, yes. We continue to look for other types of technologies and programs that we think fit nicely into what we want to become here and achieve at Neurocrine in terms of being a global neuroscience company. So I would expect us to continue down that route moving forward.

We continue -- are continuing to look as we speak now to augment the portfolio, but I would say it's always done in combination with what our R&D organization is doing as well. They are adding programs to the pipeline and likewise through business development we want to grow the pipeline as well.

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Operator [28]

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Our next question comes from Geoff Meacham with Barclays.

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Kevin C. Gorman, Neurocrine Biosciences, Inc. - CEO & Director [29]

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We can move on to the next, operator, and come back to Geoff when he is available.

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Operator [30]

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Certainly. Our next question comes from Charles Duncan with Cantor.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [31]

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Congrats on a great year of progress. I had a question for Kevin or Eric and then one follow-up for Eiry. For Kevin or Eric, regarding the Talk About TD Awareness campaign, kicking that off now, is that really a function of the progress you've made in the market and prescribers being ready for this campaign? Or is it a function of you feel like you've kind of halved out the early adopters in terms of prescribers and/or patients?

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Eric S. Benevich, Neurocrine Biosciences, Inc. - Chief Commercial Officer [32]

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Thanks for the question, Charles. And I think it's much more the former versus the latter. Certainly, when we were preparing for the launch and we were learning about the TD opportunity and having discussions with thought leaders in psychiatry and neurology, we learned that TD was an area that was -- we'd like to say forgotten, but not gone.

Meaning that when we needed to do work to raise the prominence of TD, to bring it to the forefront once again in those communities, in those health care provider communities, because it was a condition that over the years a certain inertia had built up and a inability to really face the condition and to address it due to a lack of effective treatment options.

And so we had started investing in disease education and disease awareness on the HCP side for about a year leading up to the launch. And we wanted to make sure that we were sequencing our educational efforts, first with the HCPs and then eventually with patients and caregivers.

And our initial efforts with patients and caregivers came through some of the partnerships that we developed with patient advocacy organizations to introduce the idea of tardive dyskinesia, a movement disorder that was a consequence of treatment with dopamine blocking drugs, primarily antipsychotics and other psychiatric medications.

And we feel like we got to a point in 2018, where it was time to talk about TD with -- directly with patients. And start to encourage those conversations between the patients, the family members and their psychiatrists or their neurologists. And so I think you see that, if you've seen the ad or you visited the Talk About TD website.

So for us it was really about staging, it was about making sure that we had appropriately educated the provider audience before we encourage patients to come in and start asking about their involuntary movements. And so we wanted to make sure that we did it in a thoughtful manner and that we did it in the appropriate way and we feel really good about the campaign that we have developed.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [33]

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Okay. That's helpful and I appreciate the added color. Quickly to Eiry, I had a question about the VMAT2 inhibitor program. I know it's earlier days, but I'm still stuck on the T-Force GOLD results. And I guess, I'm wondering what are some of the ways to think through the potential approach for the second-generation VMAT2 inhibitor in terms of the types of indications that you may consider developing it in?

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Eiry Wyn Roberts, Neurocrine Biosciences, Inc. - Chief Medical Officer [34]

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Thanks, Charles. So it's a very good question. The -- first just a comment, a couple of comments about T-Force GOLD. I mean, we were very disappointed with the results for T-Force GOLD particularly for patients with Tourette's syndrome who clearly have a need for additional and different therapeutic options.

What we learned from the top line data that we released was that valbenazine was clearly active in terms of its ability to suppress ticks in patients with Tourette's syndrome, it just was the magnitude of the activity was not as great as we had hoped for or expected. And as a result, obviously that led to the study being negative.

As I mentioned in my comments, we are still digging very deeply into the data from the T-Force GOLD study and that we'll use our learnings from that to inform not only the decision for T-Force PLATINUM in the remainder of our Tourette program, but also to inform our thinking around the second-generation VMAT2 inhibitor.

We have not talked openly about the potential indications for that follow-on medication as yet. It's too early for us, and we're just pleased with the progress that we're making in the clinic in Phase I right now.

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Operator [35]

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Our next question comes from Geoff Meacham with Barclays.

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Kevin C. Gorman, Neurocrine Biosciences, Inc. - CEO & Director [36]

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Okay. We can move to the next. I think, it's David.

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Operator [37]

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Certainly. Our next question comes from David Amsellem with Piper Jaffray.

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David A. Amsellem, Piper Jaffray Companies, Research Division - MD and Senior Research Analyst [38]

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So two quick ones. First regarding M&A. You talked about adding clinical stage assets, development stage assets, I guess the question is, looking at your sales organization, which have used a leverageable asset, what's your interest level in adding commercial stage or market-ready asset in neuropsychiatry? That's number 1.

And number 2, regarding opicapone, just wanted to get your thoughts on underlying market dynamics, bearing in mind that you have dopamine agonists that are generically available, you have COMT inhibitors that are generically available. So how do you think about that dynamic in terms of payer challenges for that product?

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Kevin C. Gorman, Neurocrine Biosciences, Inc. - CEO & Director [39]

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I'll take the first question and Eric will take the second question. And Kyle, you chime in here also. First and foremost, I would say that our commercial organization is really 100% focused on INGREZZA right now. I think to add anything in the near term, certainly to add anything prior to opicapone coming available next year into the sales force's hands, would probably not be beneficial to INGREZZA.

So in looking at it in that way, we ideally -- and you don't often get the chance to really choose your times when you would do this, but I would think ideally it would be later that we would look for another commercial asset. But probably even more important than that is in looking out there, finding a compelling commercial asset to bring in to the company.

There are some really novel interesting drugs that are out there, but they're just not available. Those that are available are not ones that we would be interested in at this time. Kyle, do you have anything to add to that?

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Kyle Gano, Neurocrine Biosciences, Inc. - Chief Business Development Officer [40]

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No, I think you captured the dynamics of what we're seeing out there now, and we've chosen to go into clinical development even earlier to look at some of the novel technologies and programs that we can develop ourselves over time and then bring into our own commercial organization.

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Kevin C. Gorman, Neurocrine Biosciences, Inc. - CEO & Director [41]

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Yes, the bottom line is that we are dedicated to discover, develop and commercialize important medicines. Medicines that are going to have a true fundamental change in the way patients are treated. And so that is what guides us in all the deals that we do. Eric, you want to take the second one on opicapone?

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Eric S. Benevich, Neurocrine Biosciences, Inc. - Chief Commercial Officer [42]

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Yes, the second half of the question was really sort of why we're excited about opicapone and where it fits in potentially into the current treatment paradigm in Parkinson's disease. So certainly, we were aware at the time that we were doing diligence and license opicapone, that there are alternatives for the treatment of motor fluctuations in these Parkinson's patients on levodopa therapy, both within the COMT class and their other classes of drugs.

But what attracted us to opicapone was really the opportunity to bring an improved COMT inhibitor to market that addresses the deficiencies of currently available treatments. And so historically, 2 COMT inhibitors have been approved and launched in the U.S. The first was tolcapone. It had good efficacy, but unfortunately not long after it launched, a signal came to light of hepatotoxicity, and it was subsequently pulled from the market.

Entacapone was the second product that was launched in the class. And certainly, the feedback that we've gotten from our advisers in movement disorder neurology is that it leaves a lot to be desired in terms of its profile. It doesn't have a significantly large magnitude of benefit in terms of the efficacy. It has to be taken up to 6 to 8 times a day with the levodopa dose. And there are some tolerability issues, specifically most commonly with diarrhea.

So opicapone really addresses a lot of these deficiencies with the existing COMT inhibitors. Strong efficacy, it's well tolerated, it's once daily, and we think that it delivers on the unfulfilled promise of COMT inhibition.

In addition, we've heard from our advisers about some of the challenges with the other classes of medications, including the dopamine agonist as well as the MAO B inhibitors. And so we think there's an opportunity not only to be the best-in-class COMT inhibitor, but to be the best adjunctive therapy period.

And certainly, the feedback we've gotten from the KOLs in the movement disorder Parkinson's area is that they're very excited about the clinical profile of opicapone. And we're working with them to make sure that we're appropriately positioning this medication, putting the best foot forward in terms of the data and looking forward to the opportunity to launch it in 2020.

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Operator [43]

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Our next question comes from Laura Christianson with Cowen.

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Laura Christianson, Cowen and Company, LLC, Research Division - Research Associate [44]

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Just a quick one on how you're thinking about the CAH indication, and specifically, whether you're targeting mostly pediatric patients? And if you think you'll be able to garner orphan drug pricing?

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Eiry Wyn Roberts, Neurocrine Biosciences, Inc. - Chief Medical Officer [45]

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I'll take the beginning of that question and then maybe Kevin or Eric can help on the second part. As I mentioned earlier, CAH is a congenital disorder, which presents early in life and it requires continuous therapy throughout life. So we do believe that having the opportunity to treat both adults and pediatric patients with CAH as part of our program is very important.

Obviously, the -- as I mentioned earlier as well, the biomarker levels that we're looking at within our current proof-of-concept study are incredibly important to the management of the disease throughout, and will form an important part of any broader clinical program, both in pediatrics and in adult patients.

And so our goal is to provide a therapeutic that can be available as broadly as possible for patients with CAH from early in their life and being able to support them throughout the course of their disease.

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Kevin C. Gorman, Neurocrine Biosciences, Inc. - CEO & Director [46]

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And also in answering the part of your question about pricing there, about 20,000 to 30,000 patients both here and the same number in Europe, but it's a little too early for us to talk about pricing at this point in time.

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Operator [47]

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Our next question comes from Anupam Rama with JPMorgan.

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Tessa Thomas Romero, JP Morgan Chase & Co, Research Division - Analyst [48]

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This is Tessa on for Anupam this evening. One from us on what the elagolix royalty was for 4Q, we see $1.166 million in collaboration revenue, and is this all the royalty? And then maybe more broadly on ORILISSA, can you remind us what the potential milestones to anticipate in 2019?

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Matthew C. Abernethy, Neurocrine Biosciences, Inc. - CFO [49]

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This is Matt. So that is correct. Collaboration revenue for the quarter reflects the ORILISSA royalty that we did receive. As it relates to 2019, I believe on AbbVie's call last week, they mentioned an expectation of around $200 million in that product sales for ORILISSA is the expectation for 2019.

And then the related milestone, as we highlight in our press release, is $20 million this year upon the submission of the FDA's acceptance of our NDA, which should be sometime mid-year. So it's a $20 million milestone in 2019.

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Operator [50]

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Our next question comes from Paul Choi with Goldman Sachs.

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Paul Choi, Goldman Sachs Group Inc., Research Division - Equity Analyst [51]

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I wanted to ask about Voyager, and I know the collaboration has yet to close this quarter, but can you maybe provide or if you're willing to, some guidepost as to what you might be able to disclose over the course of 2019?

And secondly, with your greater resources and incremental spend that you're able to put into these programs, how do you think about the possibility of accelerating development of the various programs, including either Parkinson's or Friedreich's ataxia?

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Kevin C. Gorman, Neurocrine Biosciences, Inc. - CEO & Director [52]

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Yes, Paul, you're right. It is a little early for us to talk about this. It hasn't closed and therefore we cannot collaborate with Voyager at this time. There certainly will be news flow out of our collaboration with Voyager. Once we get together, once we define some guideposts, I would say that there is a lot of learning still left on our part.

And there are a lot of -- there are a lot of attributes that we can bring to Voyager right now particularly in Eiry's group in helping with the recruitment and the clinical trials that are ongoing and then planning for the second pivotal there. So there's going to be quite a bit that we're going to be doing, but right now until this closes such that we can actually collaborate, there's not a whole lot I can say.

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Matthew C. Abernethy, Neurocrine Biosciences, Inc. - CFO [53]

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I would add Paul, just to make sure you caught it in the prepared remarks, we did highlight that we would be investing. Our estimate is between $40 million and $50 million. So I know Kevin highlighted sort of the pipeline progression and we're obviously very excited on the Friedreich's ataxia asset and be able to obtain a clear path there for ourselves as well as for you, but I did want to make sure I highlighted that.

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Operator [54]

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Our next question comes from Jeff Hung with Morgan Stanley.

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Jeff Hung, Morgan Stanley, Research Division - Equity Analyst [55]

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Maybe if I can follow up on a couple questions on Voyager. Can you talk about your confidence in the regulatory path forward for the ADC program following their recent meeting with the FDA? And then can you remind us what aspects of the statistical plan remain outstanding?

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Kevin C. Gorman, Neurocrine Biosciences, Inc. - CEO & Director [56]

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Yes, Jeff, they are good questions, but again these are the types of questions that we are not able to answer right now. And so we're going to put off those questions until we've actually engaged Voyager, and then we'll be speaking as a joint collaborator on all of these questions in the near future.

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Operator [57]

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We'll go next to Marc Goodman with SVB Leerink.

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Marc Harold Goodman, SVB Leerink LLC, Research Division - MD of Neuroscience & Senior Research Analyst [58]

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A few questions. First of all, on the expenses, can you help us with SG&A versus R&D? Should we be thinking about split evenly $300 million, $300 million? And did I hear you say that T-Force GOLD was the difference between the high-end and the low-end, so that's $50 million? So if you cancel that program after, let's say, one quarter, we should go to the low end?

And then second question is, can you talk about your expectations for gross to net for INGREZZA for 2019, just in -- for the full year?

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Matthew C. Abernethy, Neurocrine Biosciences, Inc. - CFO [59]

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Yes, yes. Thanks, Mark. Good to hear from you. This is Matt. So from a dollar split perspective, as you can see from our 2018 results, we had around $250 million in SG&A and around $160 million in R&D. So from a ratio perspective, you wouldn't assume a 50-50 split.

Some significant investments are going behind SG&A. Now number one, as you know, is the sales force expansion and the full year impact of that expense. The second piece is the disease state awareness campaign, which is around a $20 million-type investment that would also be within SG&A. And then lastly, the opicapone marketing preparation cost for 2020 launch is also a significant investment.

But outside of Tourette, we do have significant investments going behind the R&D programs that we highlighted earlier. From -- how do you get from the middle of the range to the bottom or to the top? Really to get towards the bottom, one aspect is the Tourette program, if we did discontinue the Tourette T-Force PLATINUM study, also to get to the bottom end I gave a range on Voyager and then also it comes down to clinical -- the other clinical program execution like CAH.

So I wouldn't assume that the Tourette decision is a $50 million spread. What I tried to highlight in my comments, is it would likely put us into the bottom half of our guidance -- OpEx guidance range. And then can you remind me of the second, on the gross to net...

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Marc Harold Goodman, SVB Leerink LLC, Research Division - MD of Neuroscience & Senior Research Analyst [60]

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Yes, on the gross to net for '19.

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Matthew C. Abernethy, Neurocrine Biosciences, Inc. - CFO [61]

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Gross to net, the biggest aspect right now pertains to the donut hole impact in Q1. The largest long-term impact on gross to net is going to come down to contracting. And at this time, we have been very, very thankful for the access that patients have had based upon relationships with the payers at this point. So should that change dramatically into the future, we would have a more dramatic impact on our gross to net, but that's not something that we're highlighting as far as 2019 is concerned.

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Marc Harold Goodman, SVB Leerink LLC, Research Division - MD of Neuroscience & Senior Research Analyst [62]

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So it sounds like gross to net comes up a little bit because of the donut hole, but that's the only thing.

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Matthew C. Abernethy, Neurocrine Biosciences, Inc. - CFO [63]

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Yes. Q1 will be the highest discount rate and then that gradually improves throughout the year as that is less and less of an impact of your overall gross to net. That's fair, Marc.

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Operator [64]

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Thank you. There are no further questions at this time. I'll turn it back to Kevin Gorman for any additional or closing remarks.

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Kevin C. Gorman, Neurocrine Biosciences, Inc. - CEO & Director [65]

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Yes. Thank you very much, and I really appreciate, as we all do, the questions that you've presented us with this afternoon. We're going to be looking forward to seeing you at several meetings over the next few months.

I'm going to leave you with 3 things. For this year, as we look forward, we're going to be expanding and advancing our pipeline, and clearly the Voyager deal has already expanded that pipeline substantially. And with that Voyager deal and with everything else that I told you about the investments that we're making, we're building on our strengths while we're expanding our scientific and clinical reach. And so what you're seeing from us is we're investing not only for today, but also for tomorrow.

I look forward to meeting you all and talking to you in the very near future. Thank you very much.

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Operator [66]

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Thank you. This does conclude today's conference. We appreciate your participation. You may disconnect at any time, and have a great day.