Use access key #2 to skip to page content.

It is time for NBIX to fly

Recs

1

September 10, 2007 – Comments (0)

By Dr. Thomas Li

Target 17.5-18.5

After 16 months of consolidation, finally it is the time for Neurocrine Biosciences to fly.

Financially, the company is strong with 150 million cash and 60-70 million in real estate.

Fundamentally, it is very interesting with huge potential (regarding stock price) and uncertainty in the coming three months.

The key issue is around Indiplon, the company’s leading drug candidate to treatment insomnia. Will FDA approve it on December 12? Can Neurocrine Biosciences find a big pharma partner to promote it? How big is the market for Indiplon? It is impossible to give concrete answers to those questions by anyone. My best guess is the following:

70% chance to get FDA approval this go-around.

90% chance to find a decent partner.

The peak sale is between 200-600 million.

Base on this, the value of Indiplon is between $350 million to 1 billion at this time in my valuation model. I could be totally wrong here in either way because nobody knows for sure about Indiplon's sale until it is on market for a year.

Neurocrine Biosciences’ pipeline is as colorful as any sub-billion dollar company can get. GnRH, CRFs and Urocortin 2 are all in phase II trials. But I do not give them any value until they generate cash from partnership as Gary Lyons suggested on “GnRH by year end” in the conference last week.

So in my opinion, NBIX’s fair value is around $600 million at this time. The market value is only $400 million.

Technically, the consolidation phase is over and it is taking off now. I see it go all the way up to 17.5-18.5 before the FDA’s decision. Along the way, we need decent partnerships for Indiplon and GnRH, and any positive clinical trials wouldn’t hurt.

Good luck to all longs.

0 Comments – Post Your Own

Featured Broker Partners


Advertisement