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Neurocrine Biosciences: A Quality Biopharma To Consider On Any Pullbacks

May 06, 2020 12:01 PM ETNeurocrine Biosciences, Inc. (NBIX)3 Comments
Andy Jones profile picture
Andy Jones
1.96K Followers

Summary

  • Neurocrine Biosciences has a soon to be blockbuster in Ingrezza that is bringing in solid free cash flow.
  • Neurocrine has used that cash flow to fill its pipeline with several early, mid, and late stage therapies.
  • Neurocrine shares look fairly valued based on both current and forward discounted P/S and P/E ratios.

Neurocrine Biosciences (NASDAQ:NBIX) is a biopharma company focused on treating CNS and endocrine disorders. Neurocrine has been cash flow positive for the last 2 years off the back of strong sales of Ingrezza, a soon-to-be blockbuster used to treat tardive dyskinesia. Rather than resting on its laurels, Neurocrine is reinvesting that cash flow to develop a broad pipeline of potential therapies that could meaningfully add to its upside over the next few years. Much like I described with Horizon Therapeutics, Neurocrine has a strong business model that gives me confidence that it can sustain more growth and innovation moving forward—things I definitely look for when considering a new investment. Sales and earnings-based metrics though make me think Neurocrine is probably pretty fairly valued right now.

Ingrezza Provides Neurocrine With A Strong Foundation Of Revenue

Ingrezza has almost single-handedly gotten the company to positive cash flow, and now Neurocrine is reinvesting into future growth via the pipeline. Ingrezza is a VMAT2 inhibitor used to treat tardive dyskinesia. Dopamine has been shown to be involved in the disease pathology of tardive dyskinesia, and Ingrezza is thought to have its effect by blocking dopamine release. Ingrezza brought in $752.9 million of Neurocrine’s $788.1 million in total revenue in 2019, up from $409.6 million in 2018.

Figure 1: Ingrezza Sales Chart (source: corporate presentation)

Ingrezza growth is expected to continue at a good pace. Although Ingrezza is being researched for an additional indication for chorea in Huntington’s disease, peak sales estimates that I’ve seen for tardive dyskinesia alone range from $1 billion to $2 billion. Q4 2019 sales of Ingrezza would annualize to about $950 million, which would still be 21% growth over 2019 even if quarterly prescriptions bucked the clear growth trend you can see if Figure 1.

Neurocrine also receives royalty payments

This article was written by

Andy Jones profile picture
1.96K Followers
I have a value investing background and look for biotech stocks with a wide margin of safety. I tend to focus on companies that are somewhat off the beaten path. Anything I write is simply my personal opinion and should not be taken as trading advice.

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