NBIX Releases Positive Results

Lilac Petal Results Lie in the Interpretation of the Data

On March 25, 2009, Neurocrine Biosciences, Inc. (NBIX - Analyst Report) reported results from the phase II -702 study, also called Lilac Petal, testing elagolix for the treatment of endometriosis.

Elagolix met the primary efficacy goal for both the 150mg and 250mg on the clinically validated PGI-C scale for both overall lower PGI-C score and percent of women with a score below 2. The 150mg dose was also statistically significant for the clinically validated EHP scale.

Management was also able to show a statistically significant reduction in baseline for the NRS-peak scale and dysmenorrhea (DYS).  The trial failed to show a significant reduction in NMPP or the NRS-mean scale, both which management hypothesized where measuring the same thing -- non-menstrual pelvic pain on a daily basis -- to a correlation of 0.9, and both which started with baseline values that were relatively low on the scale to begin with and did not change much over the course of the program.

Overall, we believe the results of the Lilac Petal (-702) study are positive. It is clear that the FDA is interested in assessing non-menstrual pelvic pain as a key component for approving an endometriosis drug. However, this is the first time a clinical program looked at non-menstrual pelvic pain on a daily basis. The original Lupron and Depo-Provera studies all assess non-menstrual pelvic pain on a monthly basis. We already know that elagolix works on monthly basis from the -602 Petal study.

Women tend to remember or recall the worst days of pain over a monthly period as opposed to daily fluctuations in pain. This hypothesis is backed up by the fact that the NRS-peak did show a statistically significant reduction for elagolix vs. placebo whereas the NRS-mean did not. What is comes down to is that assessing mean non-menstrual pelvic pain on a daily basis was non-applicable or sensitive enough for a population with mild-to-moderate disease (the target market).

In April 2009, Neurocrine should release the full 6-month data on the Petal-602 study. We should see additional safety data and the full analysis of the DXA scans. During the summer, Neurocrine should release the 6-month data from the Lilac Petal-702 program. This data should give us a better sense of durability of effect, additional safety information, DXA scan data, and a more detailed analysis of the multiple endpoints.

In October 2009, management should released data from the Tulip Petal-703 program. This trial is a similar design to the -702 program, only with an active comparator in leuprolide depot (Lupron).

Once all this data is in hand, management will request an end-of-phase II meeting with the FDA to take place in the 4th quarter 2009. At that meeting, management and the FDA will outline a pivotal phase III program for elagolix. We expect that the pivotal phase III program will include two large-scale (n~500) patient programs with some modified NRS / NMPP / DYS endpoint. There will also be a long-term (n~400) safety program, and a head-to-head non-inferiority program vs. Lupron for the European submission.  These trials should start during the first half of 2010.

In the meantime, management remains in late-stage discussions with potential partners for elagolix. That being said, we still don’t think they sign a deal until after the -703 data comes out later this year. We think partners will want to see the full 6-month data from -602 and -702 before they sign. And, the potential exists that partners may want to wait until after the end-of-phase II meeting with the FDA in the 4th quarter 2009 so they have a better idea of what’s in store -- in terms of costs and achievability -- for the phase III program.

Nevertheless, we believe elagolix is a highly attractive molecule and a lucrative partnership will eventually be secured prior to 2010. We have a positive bias on Neurocrine Bio. Our price target remains $5.