Neurocrine Biosciences, Inc. (NASDAQ:NBIX)

HealthcareGuy

Neurocrine has been turning in solid pipeline progress for several years now but they haven't had much success holding gains in the share price. Now that the phase III trial of elagolix is in progress I expect at least a year before all 875 patients are enrolled and possibly another year before topline data is released. I'm not expecting any other catalysts in the near future and if previous patterns hold the share price will drift back below 7 before the runup into phase III data.

Good potential, especially with Elagolix, but I'm still short on NBIX just like I was over a year ago. There is simply too much uncertainty over being able to turn a profit in the next few years. Estimates range from 20 cents EPS in 2012 to losing 10 cents. 2013's outlook is fairly similar and it isn't until 2014 that it may be possible for them to turn a strong profit. However, there is much work to do before then and I will be short on this one until they prove they can turn a profit on a consistent basis. I've taken a flat out beating on this one so far, but I still can't justify it being worth this much until there is more concrete data.

low PEG, strong price uptrend

Steadily improving financial results, as in less and less losses. Then in quarter three, we earn nearly half of the share price in one quarter. According to Larry D. Spears of Money Morning:

"NBIX concentrates on neurological and endocrine-related diseases and has eight products in various phases of development and testing. The company has just begun generating revenues from two of its therapies, including one for type 2 diabetes, America's number one growth disease. Revenue of $32.9 million is expected for 2010, with growth to $68.8 million, and NBIX posted its first-ever profit of $3.33 a share in the third quarter. What makes it most interesting, however, are its "pipeline partnerships" with Abbott Labs in men's and women's health, GlaxoSmithKine (GSK) in anxiety and depression treatment, and Boehringer Ingelheim Chemicals for diabetes - assuring NBIX of needed funding and ample future marketing help."

This is a brief outline of how and why I selected NBIX to underperform:

(1) NBIX is a "one star" stock at TMF and was selected to underperform by "top fool" UltraLong on 6.22.10 at $5.75.

(2) NBIX appears to have hit and maintained a floor at about $6.50 since its new contracts with Abbott and Boehringer Ingelheim in early June lifted it from the $2 to $3 zone.

(3) Otherwise, since June, NBIX has traded in the $5 to $6 zone. As it is now well above $6, it can be expected to approach $5.50 in the next month or so.

(4) NBIX trade is the $4 to $6 zone in 2008 and in the $2 to $4 zone in 2009. So, it is close to what amounts to a three year high.

(5) NBIX is a typical "zombie" biotech company that has never been profitable yet manages to periodically and temporally re-fund itself. It peaked at $70 in 2006 before crashing to $10.

(6) NBIX other Phase 2 clinical trial, sponsored by GlaxoSmithKline, was announced as a failure in September.

(7) It is highly unlikely that NBIX will ever develop a drug accepted by the FDA and in the very short term it is unlikely that NBIX will have any more significant positive news events.

In short, it appears highly likely that NBIX will approach $5.50 in the next month or so. There shorting it at about $6.30 appears to be of reasonable risk.

"If you chase two rabbits, you will lose them both."
- Native American saying

Neurocrine Biosciences, Inc. (NBIX)
Discovers, develops and intend to commercialize drugs for the treatment of neurological and endocrine-related diseases and disorders. Product candidates will target insomnia, anxiety, depression, cancer, diabetes, and multiple sclerosis.
Neurocrine Biosciences, Inc. was founded in 1992 and is headquartered in San Diego, California.

Commentary:
As for development pharmaceutical companies, what counts is their potential not their past performance, which is in case of Neurocrine Biosciences horrible indeed.
The potential is not be bragged about either, and since technicals are on the top 288M, I think this stock price is going to underperform the market.

medical/biotech related picks - 4 buys / 4 sells
BUY:exel,idra,rtix,dcth
SELL:pbth,pcyc,vrtx,nbix

ultralong

NBIX has a too high valuation compared to its sales potential. It is also loss making at least until 2011. Its stock price may be more than halved.

Promising recent results for Elagolix. I believe the corticotropin antagonists will become the new standard for treating IBS, depression, anxiety and even schizophrenia.
I will be buying this for my real portfolio

Very encouraging results for their endometriosis drug elagolix. This is the time to jump into a biotech, when the intial clinical results are good and the company is still not followed much. The upside can be huge long before the drug gets near to the market

Big short interest. Any good news might shoot it up.

I've said it before and I will say it again, drugs are good.

Great pipeline, lots of cash. If they can partner some of their programs they should head to to 10+ this year.

dont see any upside in the near term. Indiplon is such a disappointment, without a partner its going to be tough paying for more trials.

22 May 07

As with Élan—one of our other biotechs—Neurocrine Biosciences (NBIX) have had their ups and downs. The stock was at an all-time high $70 14 months ago when the FDA somewhat surprizingly turned down their proposed anti-insomnia product, Indiplon. The stock dropped down to $60 when it appeared that a quick fix might be possible, at least in part…but five weeks later, Pfizer (PFE) terminated their four-year old worldwide Indiplon partnership with Neurocrine and the stock plummeted to $10. And it has pretty much remained there ever since.

Indiplon’s claim to fame is that it works and—even if you take it in the middle of the night after waking up and not being able to get back to sleep—there is no “hangover” the next day. Many insomniacs find that the products currently on the market, while effective, inhibit their ability to operate normally the next day.

Exactly what happened back in 2006 is a little unclear, but the New Drug Application (NDA) submitted by Neurocrine-Pfizer was for 5mg and 10mg fast-acting capsules and 15mg slow release tablets, and the FDA issued an approvable letter for the capsules and a non-approvable letter for the tablets. In retrospect, it appeared that Neurocrine-Pfizer screwed up on the 15mg dosage, submitting more data relevant to a 20mg dosage (for which they did not seek approval) and then applying for a expedited approval and even failing to get results from one relevant study to the FDA in time for it be included in their review. In any event, five weeks after the 15 May decision, Pfizer evidently reached the conclusion that the cost of getting the 15mg dosage approved—presumably another study—outweighed the benefits, and as that long-acting dosage was projected to account for half the product revenue or more, the prospective approval of just the 5mg and 10mg fast-acting dosages did not suffice to continue the partnership.

At first, it appeared that a new three-month safety and efficacy study would be required for the capsules, too, but fortunately, after several months of discussions with the FDA, NBIX management announced in January of 2007 ( http://phx.corporate-ir.net/phoenix.zhtml?c=68817&p=irol-newsArticle&ID=952589&highlight= ) that all the FDA required was “the resubmission [of] further analyses and modifications of analyses previously submitted to address questions raised by the Agency in its initial review. The FDA also requested, and the Company has completed, a supplemental pharmacokinetic/food effect profile of indiplon capsules including several meal types.” The revised NDA is expected to be resubmitted to the FDA in 2Q07 (this quarter) and the FDA should announce a decision within six months. So barring a weird screw-up, the company should be marketing “indiplon lite” by early in 2008. It is no longer a potential billion dollar product at these light dosage levels and without the marketing power of Pfizer behind it. But $70MM of revenue in 2008 and eventually up to $250MM/year seem reasonable.

Which is nice, but not the half of it. There is another potential blockbuster in NBIX’s pipeline: their small molecule gonadotropin releasing hormone (GnRH) agonists agent, NBI-56418, which is currently being tested (phase 2) against endometriosis. Endometriosis ( http://en.wikipedia.org/wiki/Endometriosis ) is a common medical condition characterized by growth of tissue like endometrium, the lining of the uterus, beyond or outside the uterus. It is frequently very painful and occasionally, depending on the location of the growths, can interfere with normal functioning of pelvic region organs such as the bladder or bowels. About 89MM women worldwide are affected, including about seven million in the USA.

GnRH agonists are probably the most effective medication available to treat endometriosis. They drastically reduce estrogen levels, which is quite effective in discouraging production of endometrium tissue. Unfortunately, they also induce unpleasant menopausal symptoms, and extended use incurs a risk of osteoporosis. This is where NBI-56418—Neurocrine’s proprietary, orally-active small molecule Gonadotropin-Releasing Hormone (GnRH) receptor antagonist—comes in. The company believe they have engineered a GnRH agonist that is effective at reducing estrogen levels but with fewer adverse effects. In January, they reported preliminary results for a second phase 2a study ( http://phx.corporate-ir.net/phoenix.zhtml?c=68817&p=irol-newsArticle&ID=947584&highlight= )—successful results from their first phase 2a study were reported in 2006—and they are presently enrolling patients in a larger phase 2b study.

The company also are working on a CRF R antagonist ( http://www.neurocrine.com/html/clin_anxietyDepression.html ) in conjunction with GlaxoSmithKline (GSK) for the treatment of depression/anxiety and on NBI-69734 ( http://www.neurocrine.com/html/clin_urocortintwo.html), a drug designed to mimic the effect of the protein urocortin 2 with respect to the treatment of congestive heart failure. These show promise but are at a more preliminary stage than the others.

So here we have a biotech worth just over $400MM with one drug—indiplon—with a potential of $100MM-to-$250MM in annual revenues likely to be approved in December (with the possibility of follow-on approval for the long-acting 20mg dose which could generate considerably more revenue) and a second drug in phase 2 testing that has $1B potential. This appears to us to be the most potentially undervalued US biotech company out there.

Unjustifiably "spanked."

Getting hit by 50% based upon an FDA Approvable Letter is overdone.

Anyone who dabbles in this Biotech sector knows it's a process...much like with Dendreon, Medarex, Pozen etc.

The fact is this is a promising company and the potential for a success story is worth much more than 5-bucks a share, which is the lowest price this stock has been in years!

Can't convince me that a stock that was once at $73.00 (back in 3/05) and $8.00 or higher thereafter is worth even less today.

Good technicals, increasing volume. Good sector