Neurocrine Biosciences Hands Out Treats For This Halloween Season

It may have not been on par with a full-size Snickers, but Neurocrine Biosciences (NASDAQ:NBIX) delivered investors a slightly late Halloween treat, as third quarter results confirmed reacceleration in the core Ingrezza tardive dyskinesia franchise. Healthier trends here remove the main source of anxiety around the stock and give the company a somewhat cleaner runway heading into some significant clinical updates over the next year.

I've boosted my fair value in response to stronger Ingrezza trends, but the increase in the share price since my last updates (here and here) doesn't leave a tremendous amount of easy upside right now. Should upcoming trials go Neurocrine's way, though, there is meaningful upside potential to be unlocked from de-risking the pipeline. I'm still positive about the long-term potential of Neurocrine shares, but with the catch-up in the share price, it's not as compelling of an idea as before.

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Neurocrine Biosciences Hands Out Treats For This Halloween Season

Neurocrine Is Seeing A Very Welcome Pick Up In Ingrezza, But Pipeline Catalysts Are Thin

Neurocrine Biosciences (NASDAQ:NBIX) is in a challenging spot for a biotech. Although the company has three approved drugs on the market, only one (Ingrezza) contributes meaningful revenue, and there has been considerable worry on the Street about whether the company had already plucked the low-hanging fruit with this drug, setting the stage for weaker sales growth. At the same time, the list of near-term clinical catalysts is relatively sparse, leaving the stock a little short on news to stoke investor enthusiasm.

The second quarter improvement in Ingrezza sales was certainly welcome, but the negative clinical update on NBI-827104 in essential tremor was disappointing (although not a big surprise), and there isn’t likely to be a lot of thesis-changing information from the company outside of Ingrezza sales for the next couple of quarters.

All of this complicates the investment case a bit. While I like Neurocrine, and I do see upside in the pipeline, the reality is that I think the valuation is pretty fair today on a risk-adjusted basis. Clinical read-outs in 2023 could drive some meaningful upside to my fair value, and that keeps me directionally positive on the shares, but I can’t say this is a superior bargain in the sector today.

 

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Neurocrine Is Seeing A Very Welcome Pick Up In Ingrezza, But Pipeline Catalysts Are Thin

Better Ingrezza Sales And A Clinical Trial Read-Out Could Reignite Neurocrine Shares

I lamented back in February that Neurocrine Biosciences (NASDAQ:NBIX) was looking at a year in 2022 that was going to see a lot of behind-the-scenes work, but not a lot in the way of flashy announcements that could move the share price. Still, the shares have done okay since then, beating the biotech space at large and the S&P 500, and there are a couple of drivers that could accelerate the momentum in the share price.

With marketing efforts now less restrained by pandemic restrictions, I believe Neurocrine could rebuild some momentum in Ingrezza sales and build on the better-than-expected first quarter results. I also believe that the upcoming Phase II read-out of NBI-827104 in essential tremor could get some positive attention if the data are good enough. A good result with ‘104 could add $5/share or more to the fair value, while improving momentum in Ingrezza should quell some of the concerns about market size/saturation. With a current fair value of $110 and a line of sight to $120, I think these shares are still worth consideration, particularly ahead of what could be a very significant year of clinical data in 2023.

 

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Better Ingrezza Sales And A Clinical Trial Read-Out Could Reignite Neurocrine Shares

Neurocrine Biosciences Looking At A Year Of Heavy Lifting

 

Investors hoping for a quick return to the glory days at Neurocrine Biosciences (NBIX) are likely to be disappointed. Barring the possibility of a buyout, 2022 is going to be a year of hard work and heavy lifting, as the company invests more resources into growing Ingrezza. While 2023 is shaping up to be a year of some important clinical read-outs, pipeline developments in 2022 are more likely to be Phase II proof-of-concept - not bad, but likely not enough to energize the shares.

I'm still bullish on Neurocrine, and I think the shares are undervalued, but I can very much appreciate that this is not going to be every biotech investor's cup of tea. Ingrezza is clearly not a drug that can sell itself, and Neurocrine has chosen to focus its clinical development on high-potential, high-risk projects across neuro and psychological disorders. While there could be some major winners in the pipeline, the likelihood of early-stage failures is commensurately higher.

 

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Neurocrine Biosciences Looking At A Year Of Heavy Lifting

Neurocrine Biosciences Trading Near Its 52-Week Low As Delta Threatens The Ingrezza Rebound

 

This has been a lousy stretch for Neurocrine Biosciences (NBIX), and just as the company showed a much-needed better-than-expected quarterly result for lead drug Ingrezza, the surge in COVID-19 infections tied to the delta variant threatens to unravel the nascent recovery. Beyond Ingrezza sales, Neurocrine remains a “hurry up and wait” story, with a largely early-stage pipeline.

I continue to see real value in Neurocrine for longer-term shareholders, with a fair value close to $125/share, but it’s going to take more progress on/against COVID-19 for sentiment to shift, as well as some successful trial read-outs.

 

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Neurocrine Biosciences Trading Near Its 52-Week Low As Delta Threatens The Ingrezza Rebound

Neurocrine Biosciences: Pandemic Pressures And Few Pipeline Catalysts Continue To Weigh On NBIX

 

About the best thing I can say about Neurocrine Biosciences (NBIX) so far for 2021 is that the shares have managed to outperform a weak tape for biotech (the SPDR S&P Biotech ETF (XBI) is down about 10% versus Neurocrine’s flattish performance), though that comparison looks much worse for NBIX shares over a 12-month period.

I’d previewed some of the drivers of this weakness in earlier pieces – namely challenges to the Ingrezza franchise from the pandemic and a pipeline with few high-probability value-driving readouts. Indeed, Ingrezza has been quite weak, and while blaming that weakness on the pandemic is plausible, it doesn’t fix anything.

I still own these shares and I’m still bullish on the long-term potential, but I’ve cut back my Ingrezza expectations (again). I continue to believe that crinecerfont is an underappreciated asset, but with a pipeline still weighted more toward early-stage assets (there will be several Phase II studies underway by the end of 2021), this is a stock that could take some time to work again.

 

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Neurocrine Biosciences: Pandemic Pressures And Few Pipeline Catalysts Continue To Weigh On NBIX

Neurocrine Biosciences' INTERACT Study Fails; Worse For Sentiment Than Value

On Tuesday morning (March 2), Neurocrine Biosciences (NBIX) announced that its Phase II INTERACT study of luvadaxistat (NBI-1065844), licensed from Takeda (TAK), had failed to achieve its primary endpoint. This was what I expected; as I'd previously written, while I gave a slim chance of success, the mechanism of action and past failures of other companies made it a long-shot in my view.

Luvadaxistat may still have a future, as the company intends to pursue further investigation of a successful secondary endpoint, but the failure doesn't really impact the valuation. The bigger hit is to sentiment, as Neurocrine investors don't really have a lot to look forward to from a clinical results standpoint this year, and better sales of Ingrezza and Ongentys is likely more of a second-half driver as vaccinations lead to relaxed COVID-19 restrictions and more in-person visits.

I continue to believe that Neurocrine is undervalued, though, and investors who can tolerate a catalyst-weak 2021 may yet be well-rewarded in the years to come.

 

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Neurocrine Biosciences' INTERACT Study Fails; Worse For Sentiment Than Value

Neurocrine Biosciences Upping Marketing Spend To Support Its Platform

With weaker fourth quarter sales of Ingrezza already known, Neurocrine Biosciences' (NASDAQ:NBIX) fourth quarter didn’t hold too many other surprises. The ongoing growth of Ingrezza is going to remain under pressure so long as COVID-19 continues to impact in-person patient visits, and the same is likely true to some extent for Ongentys in Parkinson’s disease. On a more positive note, management is using its considerable financial resources to improve its marketing efforts, and an upcoming pipeline read-out could be a major positive.

Neurocrine shares look undervalued to me below the mid-$130’s. Ingrezza is far and away the largest contributor to that fair value at around $100, and further clinical studies in additional movement and/or psychiatric disorders could expand that opportunity further. Ongentys is a decent, if modest, opportunity, and crinecerfont remains an underappreciated asset in CAH, while NBI-1065844 (‘844) is a high-risk candidate in a candidate in a condition that could be worth several billions of dollars in revenue.

 

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Neurocrine Biosciences Upping Marketing Spend To Support Its Platform

Neurocrine Further Expands Its Pipeline With An Early-Stage Deal

Neurocrine Biosciences (NBIX) management has been clear that they want to reinvest the company’s growing financial resources into expanding the clinical pipeline and, eventually, the business. This has been more than just talk, with multiple deals (Idorsia (OTCPK:IDRSF), Xenon (XENE), Voyager (VYGR), Jnana) since October of 2018 that have meaningfully expanded the company’s pipeline and R&D efforts.

The latest announcement, a multi-drug R&D partnership with Takeda (TAK), is more of the same, with this partnership adding more than a half-dozen potential drugs in new therapeutic areas for the company. While the assets that Neurocrine is acquiring are higher-risk (depression and schizophrenia drugs have below-average odds of clinical and commercial success), the market opportunities are large, and the clinical assets do target some appealing underserved market opportunities.

The early stage of development limits the near-term value creation from this deal, but clinical and commercial success for one or more of the included drugs would make a meaningful contribution to Neurocrine’s future value.

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Neurocrine Further Expands Its Pipeline With An Early-Stage Deal

Neurocrine Biosciences Still Making Smart Moves To Build Long-Term Value

In a year that was always going to be relatively weak for stock-moving catalysts, Neurocrine Biosciences (NBIX) is at least hitting the mark with respect to execution. Not only did Ingrezza once again come in ahead of expectations, but the company is doing what it can to prepare to advance clinical programs once Covid-19 restrictions ease.

Ingrezza continues to represent the overwhelming majority of Neurocrine’s value, but investors can still look forward to meaningful revenue acceleration from here on the way toward over $2.5 billion in revenue. Neurocrine also has a growing early-stage portfolio focusing on severe indications with inadequate treatment options like pediatric epilepsy. I continue to believe that Neurocrine shares should trade closer to $130, with Ingrezza accounting for roughly three-quarters of that.

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Neurocrine Biosciences Still Making Smart Moves To Build Long-Term Value

Neurocrine Knocked Back On Ingrezza Concerns And Maybe The Lack Of A Buyout

Expectations can be irrational and still have power – that’s about the only reason I can see for why Neurocrine (NBIX) shares were as weak as they were coming out of the company’s JPMorgan Healthcare Conference presentation. Investors went into this conference with inflated expectations regarding biotech M&A, and it likely didn’t help matters any that Neurocrine management was once again cautious on sales guidance for Ingrezza in Q1’20.

Neurocrine is an interesting position now. The strong commercial success of Ingrezza is allowing the company to augment a so-so internal R&D effort with licensing deals that have brought the company some interesting opportunities in Parkinson’s and epilepsy, and the company’s congenital adrenal hyperplasia drug crinecerfont still appears to be underestimated in my view. With a fair value of over $130, I still see meaningful upside in these shares.

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Neurocrine Knocked Back On Ingrezza Concerns And Maybe The Lack Of A Buyout

Neurocrine Partners With Xenon To Add New Early-Stage Pipeline Assets

I’ve noted before that for all of the positives of the Neurorince Biosciences (NBIX) story, the company has never had an especially dynamic or productive R&D operation when it comes to generating new clinical candidates. With Ingrezza driving the company to profitability and positive free cash flow, management is augmenting its internal R&D efforts by actively looking for licensing and acquisition candidates, and the company announced another such deal earlier this week.

Neurocrine’s agreement with Xenon Pharmaceuticals (XENE) is fairly typical for an early-stage licensing and development agreement. Xenon doesn’t really have the resources to go it alone, and has chosen to partner out certain assets to Neurocrine to better fund other programs, while Neurocrine pays a relatively low entry price for a risky but promising portfolio of compounds for various forms of epilepsy. While the Xenon assets are too early in development to make a meaningful impact on Neurocrine’s valuation, I consider this a worthwhile use of assets for the company and consistent with the strategy management has previously laid out for investors.

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Neurocrine Partners With Xenon To Add New Early-Stage Pipeline Assets

Neurocrine Making The Most Of A Strong Ingrezza Launch

My expectations for Neurocrine Biosciences (NBIX) have been somewhat restrained for 2019, as this biotech didn’t have a lot of clinical updates on the docket and I thought the Street had largely adjusted to the stronger-than-expected Ingrezza launch trajectory. The shares have perked up recently, though, climbing more than 15% since my last update and more than 30% from a near-term low on a wider recovery in biotech stocks.

At this point Neurocrine shares don’t look exceptionally undervalued relatively to my elevated rate of return requirements for biotechs. Then again, I’m still looking for a double-digit annualized return from here, so that’s not exactly paltry. Neurocrine’s pipeline is an “is what it is” situation today, with not much thesis-changing data likely on the way, but the FDA could grant earlier than expected approval to opicapone and management has made it clear that they’re looking for other in-licensing, partnering, and acquisition opportunities.

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Neurocrine Making The Most Of A Strong Ingrezza Launch

Neurocrine Executing Very Well With Its Lead Commercial Compound

Neurocrine Biosciences (NBIX) was never set up for a great year in 2019 from a clinical data/pipeline perspective, but management is compensating so far with strong sales execution with its approved drug Ingrezza. With the company now free cash flow positive, management has a lot of options when it comes to M&A and/or in-licensing, not to mention sponsoring robust clinical programs for promising new candidates. That said, this has always been a very deliberate, patient management team and investors shouldn’t expect that to change – this is very much a “do it right” as opposed to a “do it right now” company.

I’m content to wait, as Neurocrine has shown that it can develop effective drugs, market them well, and avoid wasting resources on low-probability assets. I believe fair value for the shares is around $120, with around 70% of that from Ingrezza, but meaningful potential data-driven upside from the CAH program and possibly underestimated potential for opicapone as well.

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Neurocrine Executing Very Well With Its Lead Commercial Compound

Neurocrine Drifting, But The Total Package Is Still Appealing

Although Neurocrine Biosciences (NBIX) has a strong primary commercial asset in Ingrezza, a slower-building but still promising secondary asset partnered to AbbVie (ABBV) in Orlissa, and an improved pipeline, the reality is that the shares of biotechs in Neurocrine’s stage of life can flounder or drift for stretches of time. In the absence of new clinical data to get excited about, investors will instead fixate on short-term details or just get bored and move on, and I think that explains at least some of Neurocrine’s lackluster recent performance.

All in all, though, I still like this stock. I believe Ingrezza still has upside, and while Orlissa is taking longer to build than most investors would like, it’s still a good opportunity. Beyond that, opicapone may still be an underrated opportunity, and likewise with NBI-74788, and Neurocrine has some early-stage assets worth watching now, including its second VMAT-2 compound and its Voyager (VYGR) partnership.

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Neurocrine Drifting, But The Total Package Is Still Appealing

Neurocrine Biosciences May Have Something Interesting With NBI-74788

It’s still very early, but Neurocrine Biosciences (NBIX) might have another compelling, largely underrated, drug in NBI-74788 for congenital adrenal hyperplasia (or CAH). Although Ph IIa data does little more than work to establish proof of concept at this point, I do believe it’s enough to get sell-side analysts and investors to start doing some due diligence on what I believe could be a meaningful contributor to Neurocrine down the road.

Neurocrine shares remain undervalued, but value-drivers are looking a little more limited in the short term. AbbVie’s (ABBV) “slow and steady wins the race” approach with Orlissa might be the right way to go long term, but it could lead to some near-term disappointments in terms of growth, and neither the opicapone program or the collaboration with Voyager (VYGR) are likely to generate much near-term buzz. Still, with the shares meaningfully below my estimate of fair value, I think it’s a name to consider.

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Neurocrine Biosciences May Have Something Interesting With NBI-74788

Lundbeck Entering A Period Of Heightened Uncertainty

The next few years are going to seriously challenge the skills of H. Lundbeck’s (OTCPK:HLUYY) (LUN.KO) recently-hired CEO Deb Dunsire and head of R&D Johan Luthman, as the company has to contend with serious erosion in its mature portfolio, a very weak late-stage pipeline (not to mention risky early-stage assets), and the challenges that go with M&A and in-licensing. While Lundbeck does head into this difficult period with some strong drugs still early in their commercialization and a very clean balance sheet, investors need only look at Roche (OTCQX:RHHBY) to see how the market treats pharma companies with sluggish near-term EPS growth prospects.

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Lundbeck Entering A Period Of Heightened Uncertainty

Neurocrine Turns To Gene Therapy To Bolster Its Movement Disorder Franchise

I have been pretty consistently bullish on Neurocrine (NBIX) for a while, but one of my more frequent criticisms has been a relatively spartan pipeline. Where some biotechs will throw numerous compounds into trials in the hopes that something "sticks", Neurocrine has been far more selective in what it brings into human studies. While that almost certainly saves the company some money, it also leads to a thin pipeline and that weakness was brought back into focus recently with the failure of Ingrezza in a pivotal study of pediatric Tourette.

Neurocrine has taken a significant step to change that, with the announcement on January 29 of a partnership with Voyager (VYGR) for potentially four gene therapy programs in the CNS space. The most advanced program likely wouldn't be approved until 2024 (assuming the data are good enough), but Neurocrine could be acquiring some high-potential compounds in areas that are increasingly core to the company.

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Neurocrine Turns To Gene Therapy To Bolster Its Movement Disorder Franchise

Strong Ingrezza Sales Should Restore Some Confidence In Neurocrine

In the wake of the disappointing pivotal clinical failure of Ingrezza in Tourette’s and the sharply negative market reaction (likely exacerbated by a weak biotech market overall), Neurocrine Biosciences (NBIX) needed a boost. Investors got that boost with the company’s early announcement of strong fourth-quarter Ingrezza sales and management’s presentation at the J.P. Morgan Healthcare Conference.

I continue to believe that today’s price doesn’t even fairly reflect the value of Neurocrine’s two approved drugs (Orlissa and Ingrezza), let alone the value of the commercial and clinical pipeline (opicapone, NBI-74788, et al). Although the company’s clinical pipeline isn’t as robust as I’d like, strong data from NBI-74788 could add meaningful value to the shares, and Neurocrine has always prioritized pipeline quality over quantity.

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Strong Ingrezza Sales Should Restore Some Confidence In Neurocrine

Neurocrine Hit Hard As T-Force GOLD Turns To Lead

Long and sometimes painful experience has taught me that conservatism is a good way to go when modeling and investing in biotech, and Neurocrine Biosciences’ (NBIX) disappointing trial news Wednesday morning is just another reminder of why that is so. Although there were valid reasons to believe that the T-Force GOLD study would show that Ingrezza is an effective and safe treatment for pediatric Tourette’s syndrome, the drug had failed prior studies in Tourette’s and Neurocrine announced that this well-designed pivotal study has failed as well.

Neurocrine is likely looking at a prolonged stay in the Street’s doghouse, as the ongoing sales ramp of Ingrezza in tardive dyskinesia and AbbVie’s (ABBV) ramp of Orlissa in endometriosis (and later uterine fibroids) likely won’t erase the disappointment of this trial failure, particularly given a weak late-stage pipeline. For more patient investors, though, this is an opportunity to build or add to a position in a promising CNS-focused biotech that has solid revenue-generating assets in hand and an early-stage pipeline with some potential.

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Neurocrine Hit Hard As T-Force GOLD Turns To Lead