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FDA Meeting Should Clarify Path for Neurocrine Bio's Efforts

Includes: ABT, NBIX
by: BioNap

Neurocrine Bio (NASDAQ:NBIX) and Abbott Labs (NYSE:ABT) are scheduled to sit down with the Division of Reproductive Products at the FDA for a "end of phase 2" (Type-B) meeting in late March 2011. In total, Neurocrine and Abbott should be able to bring to the FDA data from 12 phase I programs and 6 phase II programs (2 phase IIa and 4 phase IIb) on roughly 1,000 patients. The goal of the meeting is to finalize plans for the phase 3 meeting, which we expect to start in second quarter 2011. We expect that the pivotal phase 3 program will include two large-scale (n~500) patient programs with co-primary dysmenorrhea and non-menstrual pelvic pain endpoints. Secondary endpoints, including dyspareunia and a patient global impression of change (PGIC) will also be assessed. We also expect there to be a long-term (n~400) safety program. Abbott has plans for a separate phase 3 program for the European submission after discussions with the EU regulatory authority.

Background Info on Endometriosis

Endometriosis is a medical condition characterized by growth of the endometrium (uterine tissue) outside of the uterus, most usually on the pelvis, that affects an estimated 100 million women of reproductive age worldwide, or about 5-10% of the female population, according to the World Endometriosis Foundation. There are an estimated 8 million women affected by endometriosis in the U.S. Endometriosis also occurs in a small percentage (2-4%) of postmenopausal women. Symptoms of endometriosis are severe recurring pain that can include dysmenorrhea (menstrual pain), dyspareunia (painful sex), dyschezia (painful bowel movements) and dysuria (painful urination).

Endometriosis is caused by an excess of the hormone estrogen, and thus can manifest during peak reproductive years. Hereditary and environmental factors, as well as associated infections (such as HPV), can increase incidence and severity. The disease is often treated, ineffectively, by a number of medications. NSAIDs are used to treat mild-to-moderate pain associated with endometriosis. Progesterone or progestin and hormonal contraceptives are used to regulate estrogen levels when appropriate. In fact, industry data show that almost 20% of all oral contraceptives prescribed are written specifically for the treatment of endometriosis. Steroids and aromatase inhibitors are used to block estrogen levels and endometrium growth. However, these have significant negative side effects. Lupron, an injectable gonadotropin depo shot, is used to lower estrogen levels and slow endometrium growth. However, Lupron shuts down estradiol production and puts the body into “medicated menopause," resulting in significant side effects such as hot flashes and a reduction in bone mineral density. In the most severe cases, a hysterectomy is performed.

Elagolix, a gonadotropin-releasing hormone (GnRH) antagonist has efficacy characteristics similar to Lupron for the treatment of endometriosis, but with less potential for bone mineral density loss. It is also the first oral small molecule GnRH antagonist. The drug works by blocking the action of GnRH and suppressing luteinizing hormone and follicle-stimulating hormone. There are a few other GnRH molecules on the market, but none that are oral in dosing or have amassed the clinical data of elagolix. Therefore, we believe that Neurocrine can achieve significant market share gains with elagolix upon commercialization. Most women shy away from Abbott’s Lupron due to side effects. Nevertheless, Abbott is still the market leader in this category. As such, we believe that Neurocrine has the ideal pharmaceutical partner to further develop and commercialize elagolix.
Peak sales for elagolix in the U.S. are $500 million. We believe a specialty Ob/Gyn sales force of 200 to 250 representatives can effectively target greater than 90% of the market.

Positive On Neurocrine Bio

We remain optimistic on Neurocrine Bio. The company's balance sheet on December 31, 2010, reflected total assets of $144 million, including cash and investments of roughly $135 million. Management expects to end the year with roughly $130 million in cash and investments.
Revenues are expected to increase to approximately $75 million to $80 million in 2011. We currently forecast net income in 2011 at $37.3 million, with EPS at $0.66.

The company should see its lead product candidate enter phase 3 trials during the second quarter of 2011. Meanwhile, phase 2 programs with Urocortin-2 and VMAT-2 are also moving forward with little cost to the company. We believe Neurocrine is in an outstanding position to build shareholder value over the next several years based on these factors. We recommend accumulating the stock at today’s price, up to our $12 target.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.