Neurocrine Bounces Back With Authority, But Little Upside Appears Evident As New Year Approaches

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Stephen Ayers
3.87K Followers

Summary

  • When Neurocrine dipped into the $70s in late 2018, it seemed like an obvious buy.
  • Now that Neurocrine is nearing all-time highs again on the heels of Ingrezza, additional upside heading into the new year is difficult to find.
  • Orilissa, with AbbVie as partner, continues to underperform lofty expectations. Neurocrine will need to see better numbers soon.
  • One can also hope for a surprising opicapone market launch, positive data from programs like NBI-74788 for CAH, and promise in Neurocrine's newly partnered gene therapy program.
  • Neurocrine remains a conviction buy and is still worth holding, but I wouldn't necessarily buy or add at these prices until clear progress is made outside Ingrezza.
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Neurocrine's Ingrezza continues tardive dyskinesia dominance

Price Target Relevant Events
$125
  • Marketing approval for elagolix in uterine fibroids (1H '20)
  • Adult CAH pivotal trial initiation (4Q '19-1Q '20)
  • Opicapone commercial launch (1H '20)

Neurocrine Biosciences (NASDAQ:NBIX) continues to impress with Ingrezza's tardive dyskinesia launch, with the drug securing nearly $200M in revenue for Q3 '19:

Figure 2: Ingrezza marches towards blockbuster status (> $250M/quarter in revenue) (Source: Neurocrine corporate slides)

Neurocrine's only competition for this blockbuster indication (tardive dyskinesia) is Teva's (TEVA) Austedo, which sees itself underperforming relative to Ingrezza:

Figure 3: Austedo, relative to Ingrezza, has underwhelming revenue numbers, but because of the market opportunity, is seeing decent growth (Source: TEVA)

Ingrezza's impressive growth has stoked shares over $100 once more:

Figure 4: NBIX shares near all-time highs

Neurocrine assets beyond Ingrezza

Notice, Neurocrine is close to reaching my price target of $125 so one may, naturally, ask themselves: is there much upside from here? Well, this depends on a few things:

AbbVie's (ABBV) and Neurocrine's endometriosis pain & uterine fibroids relief drug, Orilissa, is not living up to expectations early on. Orilissa is facing strong headwinds that are preventing its uptake, as predicted by ICER:

(...) ICER raised concerns about the drug’s long-term side effects and clinical benefit and suggested that payers consider prior authorization criteria for this drug to ensure prudent use, such as requirements for previous treatment with first-line therapy and limited pre-specified initial coverage period.

Source: The Pharma Letter

Orilissa has only netted $58M, so far, this year (see the very bottom of the following chart):

Figure 5: One can only ponder how long Orilissa will be considered a "key product" by AbbVie (Source: AbbVie)

Recall, Orilissa was projected to do $200M in 2019 per AbbVie:

Source: Twitter

It is encouraging that Orillissa saw $26M in Q3 revenue compared to just $32M in Q1 and Q2 revenue. The end results are still far insufficient.

Neurocrine recently commented on Orilissa's sluggish start:

And so Marc, when it comes to ORILISSA, and our meetings with AbbVie. AbbVie acknowledges that the launch is going slower than what they had anticipated but they continue to believe that our ORILISSA will ultimately be a very significant product for them, they are in still the early stage of market creation for that and what they're doing is that they're looking at all the barriers that exist for adoption and then they're adjusting their marketing efforts right now.

So in addition to DTC to create a broad market awareness, they’re looking at certain new marketing programs to better contextualize the ORILISSA profile and differentiate for both HCP's and patients.

So their goal is to drive a higher degree of urgency, as you can imagine, and over the past several decades, there has been a real resignation on the patient side and complacency, quite honestly, on the physician side, so that is what they put additional efforts behind, but they remain very dedicated to this, evidenced by the submission of the U.S. NDA, and also starting the polycystic ovarian syndrome studies.

Source: Neurocrine, November 5, 2019

Opicapone

Neurocrine submitted a US marketing application for opicapone with a target date of April 26, 2020. Opicapone is "once-daily, oral, selective catechol-O-methyltransferase inhibitor, being developed as an adjunctive therapy to levodopa/carbidopa in patients with Parkinson's disease experiencing OFF episodes" (Source: Neurocrine). Neurocrine figures to pull in ~$150M in peak annual sales from opicapone, which is already marketed in countries outside of the US & Canada.

If this launch is to outperform expectations, this may justify a price target adjustment.

Other programs

Neurocrine also continues its work in Congenital Adrenal Hyperplasia [CAH] with NBI-74788. It recently initiated a phase 2 study in pediatric patients and plans to begin a pivotal trial in adults next year. This rare, life-threatening disease impacts between 20,000 & 30,000 US patients and has limited treatment options. If Neurocrine will see success for this indication, its price target would, surely, require a favorable alteration.

Partnered with Voyager (VYGR), Neurocrine intends to advance its two leading gene therapy programs: VY-AADC for Parkinson's disease and VY-FXN01 for Friedreich's ataxia. A phase 2 randomized, placebo-controlled trial for the former candidate was recently initiated. I find this program intriguing and believe it was a savvy move by Neurocrine. It is, however, too early to really consider it within a Neurocrine valuation.

Financial Overview

Figure 6: Neurocrine's valuation, deservingly, has a lot of Ingrezza success baked in (Source: The Formula)

Summary

Neurocrine is nearing my $125 price target on the heels of robust revenue from Ingrezza. Outside of Ingrezza, Neurocrine will have to continue to execute on clinical programs (e.g. VY-AADC, 74788), drug launches beyond Ingrezza (e.g. opicapone), and continue to hope Orilissa's market launch will finally begin to launch.

Neurocrine remains a conviction idea and is still worth holding at these prices, but I don't foresee much upside heading into the new year.

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This article was written by

Stephen Ayers profile picture
3.87K Followers
Healthcare provider (RN, BSN) | Focus: Biotech/Tech | Avid Reader | I'm not a financial expert, but that's probably a good thing | Follow me on Twitter, too ☛

Disclosure: I am/we are long NBIX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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