Neurocrine Biosciences

From NI January 2010

Neurocrine Biosciences has gradually morphed from one of the most exciting small biotech companies to one of the more tediously boring. Elagolix for endometriosis has become the flagship pipeline component, and the program has taken on an oddly hyperfeminized aspect, with a trial roster that sounds like a selection of air fresheners: The 'Lilac Petal' trial data informed the design of the 'Daisy Petal' and 'Tulip Petal' studies. The former just reported its results, wherein it produced pain improvement that had statistical but not clinical significance. None of these are pivotal studies, and Neurocrine plans to use a different outcome measure going forward. We look forward to new and improved horticultural themes in 2010-11. Partnering interest apparently is not what it was described to be--back in 2008, so they raised $10 million towards year-end. Neurocrine's neuro pipeline is thin, with only the advent of a clinical candidate from the VMAT2 program reported, aimed at Tardive Dyskinesia. GSK does have a partnered CRF-1 antagonist in Phase II, which had better work; we doubt that this partnership would survive another failure.

From NI January 2009

With indiplon dead, the founding CEO departed early in 2008. The GSK-partnered CRF-1 program failed in social anxiety, though they have initiated a depression trial with a backup. An IBS trial with the same compound should report imminently. From what once looked like the richest neuro pipeline of all, elagolix thus far looks like the survivor, and it's not even CNS-oriented. So far, this GnRh antagonist/endometriosis program has performed as hoped, but the partnership hinted at a year ago has yet to eventuate, perhaps in abeyance pending the release of further Phase II data during 1H:09. The urocortin cardiac program also survives. The coup of the year was the sale of Neurocrine's real estate in a lease-back arrangement, which occurred before the real estate market also collapsed. Neurocrine still has a strong cash position relative to its peers, but its neuro pipeline is surprisingly thin, with only the advent of a clinical candidate from the VMAT2 program reported.

From NI July/August 2008

As we had expected, the implosion of the indiplon strategy cost Gary Lyons his job as CEO, and Neurocrine has had to retrench, having lost a decade to false starts. GSK is running the CRF-1 trials, where 008 failed in social anxiety, and will report year-end on IBS. A second compound (679) will start a depression trial imminently, while 529 is in Phase I. The GnRh antagonist/endometriosis program still seems to be the most valuable asset Neurocrine owns at present, but they are no longer making predictions as to the timing of a partnership. Three Phase II trials are ongoing, with a bone density trial due to report in September. A larger endometriosis trial will report in early 2009, and a trial comparing Neurocrine's drug to leuprolide is being set up in Eastern Europe. Neurocrine does still have the benefit of a solid cash position.

From NI, January 2008

On such things do corporate fates turn so quickly: Instead of announcing approval and a marketing partners, Neurocrine had to detail all of the additional, steps now being imposed by the FDA on the approval process. Our guess is that this sets back the approval process by two to three years, at best. More likely, the FDA will never approve indiplon, at least, not during this current approval drought, where the FDA is actively looking for reasons to exclude drugs that they see as insufficiently novel. The GnRh antagonist/endometriosis program is still the most valuable asset Neurocrine owns at present, and they expect to announce a partnership soon. One wild card is the CRF program long-partnered with GSK. It is now in Phase IIa trials for both social anxiety and IBS. Neurocrine has $165 million, and we think it would be unwise to invest any more of their cash in indiplon. The first round of FDA rejection involved some failures that were at least partially Pfizer's fault, this round seems to be another example of the FDA running roughshod over its own mandate and purview. It will be interesting to see if Gary Lyons remains as CEO. He had a great first decade at Neurocrine, but he also drove the indiplon strategy (which looked brilliant at the time). Neurocrine is going to have to chart a different course now, fortunately, they have a pending GnRh partnership and $165 million with which to do so.

From NI, January 2007

A year ago we started off our NBIX summary with "2005 was prelude". Indeed it was, but prelude to a nightmarish year that we never anticipated. There were significant deficits in the indiplon NDA package,such as a noncorrespondence between the indiplon formulation used versus the one cited for labeling in the packet for elderly patients, 20mg data utilized to justify the 15mg application (!). Pfizer, which clearly had failed to exercise any oversight, bailed out when the FDA's discontent became clear. There is a defined path forward for Indiplon IR, but a more arduous one for MR. At the time of the most recent conference call regarding indiplon, it appeared to us that Neurocrine had not fully digested just how much of a setback this is. Indiplon at this point looks like it may turn out to be a niche drug challenging Sonata and Rozerem for short-acting laurels. Neurocrine states that IR might still be used for sleep maintenance, which begs the question of why the MR formulation was necessary. Neurocrine's credibility on the Street is going to take a long time to recover. Yet there are assets of value in development. The data thus far for the GnRh antagonist appears good, and this should be the subject of the next important partnership. The urocortin program is earlier on, but it has potential. The wild card now is CRF antagonism, the program that first brought Neurocrine to our attention back in 1995, but a program which-partnered with GSK, is about to enter its first Phase II trials (in anxiety and IBS) since 1996. There are numerous observers of the CNS scene who now wonder whether CRF is ever going to be a viable target. The fact that GSK has been so conservative, but now is ready for PhII, gives reassurance that, at the very least, they have achieved safety.

July 2006 Note

1) The Pfizer BOD actually did something we never expected, they eased Hank McKinnell out the door. Several years and $180 million later than they should have. But they did. Perhaps he did have to account for his role in indiplon's disastrous turn.

2) There was some gnashing and wailing when Gary Lyons announced that Neurocrine would let go its 200 member sales force--"another disappointment" one analyst said. We see it differently: It would have been easy for Lyons, enamored of the marketing model, to have held on for quite a while, as if a molecule-yet-to-be-found or, indiplon itself, was suddenly going to emerge full blown and ready to be sold to an eager marketplace. And while waiting, the sales force would have become a source of not just fiscal burn, but significant corporate distraction. Lyons did exactly what he needed to do--amputate a function which is now superfluous. This is positive news for Neurocrine's prospects.

(7/14/06--from the July/August issue)

'Moe, Larry, Cheese': The Search for Intelligent Life On the Planet Indiplon

Given the reputations, money, and stakes involved, it borders on the unfathomable that the NDA for indiplon has turned from a juggernaut into a lost episode of 'The Three Stooges'*. The FDA, Pfizer, and Neurocrine: None of them look good in the harsh light of action letters and their responses.

Neurocrine Biosciences: After all the protestations about elderly driving capacities and FDA requests, it turns out that Neurocrine was, during the PDUFA extension, submitting other required data, including inpatient results for the 15mg MR dose. It was no secret that they had backed off from their 20mg highest dose, but the degree of reliance upon 20-30mg data for the MR filing had remained obscure, given that they apparently also had three 15 mg MR Phase III trials submitted in total. It was disingenuous for Neurocrine to portray the delay as based solely on what was to have been supplemental driving data, and it was a loss of good judgment for them to have demanded that the FDA act quickly, prior to the PDUFA deadline of June 15. For the 'best managed company in the sector', as we have called it many times, this was ...dumb. Gary Lyons' strong performance over time in our view justifies his remaining at the controls--but only if the post-mortem process involves some rigorous self-appraisal and correction on his part. There has to be a more thorough understanding of what went wrong than currently seems to be the case.

Pfizer: One generally assumes that the senior partner in such affairs, the Big Pharma, has some say in the NDA process. After all, Neurocrine had never submitted an NDA before, Pfizer has reportedly filed quite a few. Either Pfizer was incompetent in its assessment of the data package and potential problems therein, or it was negligent in its oversight. Given that they had sunk $400-500 million dollars into indiplon, and that indiplon's billion dollar potential was generally considered to be a vital component of Pfizer's renewed pipeline, neither of those is acceptable. The buck stops at the top here, and in this case, McKinnell's hapless and self-serving stewardship buys him no quarter. If he does not step down, he should be fired. He won't be, for the Board that rubberstamped his $180 million salary and pension is unlikely to confront him on performance that will cost Pfizer billions. Pfizer's cash horde still gives them clout, but for us, Pfizer has now relegated itself, in spite of all its cachet, to the Pharma Bush League. Small companies looking to partner their best programs should not be reassured by the spectacle of a powerful pharma company which either was not paying attention, or was guilty of serious misjudgments; pulling the plug on the partnership at its darkest hour, walking away and leaving the small company hanging in the wind. Even if planning to buy Sepracor. Pathetic.

The FDA: In theory, the FDA should rise above the demands and flaws of the industry it regulates, serving as some anchor of dependable stability. Instead, here they sank to the task. When Neurocrine insisted that the FDA act a month early, the responsible action would have been to refuse, citing the need to review all of the submitted information. Instead, they acted in a passive-aggressive fashion, returning a verdict based on an incomplete review. Given that the FDA has no problem saying no to companies and patients in so many other contexts, there is no excuse for the fact that they failed to utilize all of the time available to them under PDUFA--no matter what the applicants were asking. Nothing will happen to the bureaucrats who allowed this agency to make a billion-dollar decision without reading all of the requisite material, but this is a sad commentary on the state of the FDA in 2006.

Bottom Line: There are no heroes or victims here. All of the parties involved made significant errors of judgment, and should have done much better.

*for our subscribers in Europe, Oceania, and Asia, The Three Stooges were a slapstick comedy act of the 1930s, whose pain-inducing pratfalls were, in general, not very funny. A fitting analogy.