Neurocrine Sheds Its Parkinson's Gene Therapy Program, While The Street Waits For Ingrezza Reacceleration

It’s been a rough run for Neurocrine (NBIX) and its investors lately. While the shares have perked up since my last update, the stock had a poor 2020, as investors fretted over weaker Ingrezza sales as the pandemic interrupted normal clinical practices and as there were no real positive clinical updates outside of the crinecerfont Phase II results in congenital adrenal hyperplasia (or CAH), and even those data were biomarker-based. Now the company has decided to jettison the Parkinson’s gene therapy program it acquired (as a partnership) with Voyager (VYGR) back in 2019.

I do have some concerns about the near-term sales/prescription growth prospects for Ingrezza, but I believe the long-term opportunity remains attractive. A stronger Ongentys launch could offer some upside, but the biggest near-term catalyst is the high-risk Phase II INTERACT study of NBI-1065844 (‘844), a DAAO inhibitor licensed from Takeda (TAK) for the negative symptoms of schizophrenia.

I’ve altered my assumptions on the Ingrezza ramp and removed the Voyager Parkinson’s program from my model. Those moves shave about 10% off of my fair value, but I do continue to believe that Neurocrine is sufficiently undervalued to make it worth owning.

 

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Neurocrine Sheds Its Parkinson's Gene Therapy Program, While The Street Waits For Ingrezza Reacceleration

Neurocrine Biosciences Hit By Multiple Setbacks

I never expected 2020 to be a strong year for Neurocrine Biosciences (NBIX), but the nearly 10% year-to-date decline is worse than expected, and it seems like the cursed year that is 2020 is starting to hit Neurocrine as well, with weaker than expected Ingrezza sales and some modest near-term setbacks in the pipeline.

The prospect of minimal Ingrezza growth through the second or third quarter of 2021 is definitely a headwind for the shares, as is the lack of strong near-term pipeline catalysts. I’ve said it before and I’m saying it again – the company’s lack of internal pipeline productivity is an issue, though one that has had an intermittent impact on valuation (it’s a handy go-to bear argument). Only about one-quarter of my valuation comes from the pipeline, though, and I still believe there’s more value here than the Street recognizes.

Unless Neurocine becomes a “vaccine stock” (a stock where sentiment is driven more by Street optimism that COVID-19 vaccines will quickly improve the situation in 2021), these shares could remain out of favor for a little while longer. Though I’m bullish on crinecerfont, that’s not a 2021 catalyst, and likewise with much of the pipeline. Still, with fair value in the $140s and Ingrezza issues that I believe are temporary, not fundamental, I believe these share are well worth consideration from patient investors.

 

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Neurocrine Biosciences Hit By Multiple Setbacks

New Data Support The Idea That Neurocrine Biosciences Is Building A Credible Parkinson's Portfolio

I had previously expressed my concern that Neurocrine (NBIX) shares could remain weak given a lack of thesis-changing data catalysts on the horizon, and the shares have fallen another 17% since my last update. I see nothing wrong with the business, but the quality of the Ingrezza business is a known factor now and most of the company’s more exciting pipeline developments are still some distance away.

To that end, the recent presentations at the MDS Virtual Congress on the company’s NBIb-1817 Parkinson’s gene therapy program (licensed/partnered from Voyager (VYGR) and Ongentys (opicapone) are “nice to have” updates. I do believe that the lack of more robust positive data on the gene therapy program is a modest negative, though I also believe that the revenue potential of Ongentys remains somewhat underappreciated by investors.

I do continue to believe that Neurocrine is undervalued, but I also an ongoing risk that investors will ignore the name in favor of companies with more exciting near-term data updates.

 

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New Data Support The Idea That Neurocrine Biosciences Is Building A Credible Parkinson's Portfolio