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Neurocrine Biosciences (NASDAQ: NBIX) - American biopharmaceutical company, founded in 1992. Engaged in research and development of drugs for the treatment of complex and little-studied neurological, endocrine and mental diseases, such as late dyskinesia, Parkinson's disease, Huntington's disease, epilepsy, depression and others.
Another biotech without revenue?
That was until mid-2017., when the FDA approved their main drug, Ingrezza, for the treatment of tardyding, a disease, arising as a side effect after treatment of schizophrenia, bipolar disorder, depression and gastroparesis. Since then, the company's business has gone uphill.: revenue grew at a double-digit rate, and the money flowed like a river and allowed to finance further research and development..
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Portfolio of approved products
<
p class=’paragraph’>At the moment, the company's portfolio is represented by a number of released promising drugs, as well as those in various phases of clinical trials. Some of them are in partnership with the world's leading pharmaceutical companies..
Ingrezza. The first and only drug for the treatment of tardyskinesia, FDA approved.
The company has no data on the number of patients served, but the number of drug prescriptions is known: for the first half of 2021 — 92.2 thousand appointments. Ingrezza is sold in packs of 30 capsules, enough for a month. In this way, rough calculation of the minimum number of patients: 92 200 / 6 = 15 367 human.
According to management, total number of people, suffering from tardyskinesia, in the United States is more than 500 thousand people, but most of them have not been officially diagnosed with the disease. Consequently, the huge volume of demand for the drug has not yet been satisfied, despite a slowdown in appointment growth.
Number of Ingrezza appointments issued, thousand
| 2016 | 0 |
| 2017 | 14,9 |
| 2018 | 71,5 |
| 2019 | 132,7 |
| 2020 | 175,7 |
| 1п2021 | 92,2 |
Ongentys. Preparation, prolonging the effect of dopamine therapy - the main in the treatment of Parkinson's disease. Its production began in September 2020 after the final approval of the FDA for its distribution.. The company evaluates, that in the U.S. alone, more than a million people suffer from Parkinson's disease.
Orilissa. Remedy for the treatment of pain in endometriosis - a chronic gynecological disease. Produced and sold by AbbVie after, how Neurocrine Biosciences gave her the results of its phase II clinical trials in 2010. The company receives royalties from sales.
According to World Endometriosis Research Foundation, endometriosis affects more than 7.5 million women in the U.S. and more than 176 million women worldwide.
Oriahnn. First FDA-approved drug for non-surgical treatment of bleeding during uterine fibroids. The main active ingredient of the drug is identical to Orilissa, its production and distribution has also been handled by AbbVie since May 2020..
Drugs at the stage of clinical trials
Valbenazine - The active ingredient of the drug Ingrezza. At the moment, it is undergoing clinical trials in the treatment of Huntington's disease and other neurological and psychiatric diseases.. Expected, that results will be obtained in the third quarter of 2021. According to the company, Approximately 30,000 people in the United States suffer from Huntington's disease..
NBI-921352 and NBI-827104 - Means for the treatment of rare forms of epilepsy. Are in phase one and phase two clinical trials. The first of the drugs is being tested in partnership with Xenon Pharmaceuticals, and the rights to the second were purchased from Idorsia Pharmaceuticals in May 2020..
Crinecerfont - A remedy for the treatment of congenital hyperplasia of the adrenal cortex, it is a hormonal disease, leading to developmental disorders in children.
Clinical trials of the drug for children and adults are in the second and third phases, respectively.. Expected, that in 2021 the third phase of trials of the drug for children will be launched.
Elagolix - The active ingredient of Orilissa and Oriahnn drugs for the treatment of female hormonal diseases. At the moment, AbbVie is conducting the second phase of clinical trials of the drug for this group of diseases..
NBI-1065844, NBI-1065845, NBI-1065846 - A number of drugs for the treatment of schizophrenia, depression and postdepressive anhedonia, respectively. All three drugs are being tested in partnership with pharmaceutical company Takeda and are in phase one or two clinical trials.. The partnership mechanism is determined by the division of profits and the payment of royalties.
Financial indicators
The main driver of revenue is the best-selling drug Ingrezza. For 2020, its sales amounted to 993 million US dollars, i.e 95% from all proceeds. Other 5% gave sales of the other three drugs.
Financial indicators, million dollars
| Revenue | Profit | Profit Margin | Net profit | Net profit margin | |
|---|---|---|---|---|---|
| 2016 | 15 | −147,4 | — | −141,1 | — |
| 2017 | 161,6 | −131,4 | — | −142,5 | — |
| 2018 | 451,2 | 36,8 | 8,2% | 21,1 | 4,7% |
| 2019 | 788,1 | 72,3 | 9,2% | 37,0 | 4,7% |
| 2020 | 1045,9 | 163 | 15,6% | 407,3 | 38,9% |
| 1п2021 | 525,5 | 94,3 | 17,9% | 74,4 | 14,1% |
Nearly 39% net profit margins in 2020 are clearly out of the picture.. Diving into the report, we see, what 300,6 million dollars from profit is a reimbursement of tax reserves. This is an accounting trick: when companies turn into profit after losses, can save a lot on taxes, and even not to pay them at the expense of losses, previously incurred.
So did Neurocrine in the early years., however, immediately reserved future benefits, as there was no certainty in further profit, hence, and in the realization of tax benefits. And in 2020, after several years arrived, decided to write off all reserves, as there is confidence, that the profit will continue. This is a good sign for the future of the company..
The company's multiples look like this:
- Indicator P / E = 23,3. This is well below the median P / E biotech, equal to 54.4. But since "paper" profit should be taken into account, which was mentioned above, then it would be wiser to pay attention to the following indicator.
- EV / EBITDA = 74,1 compared to the median 24,2 by industry. This is a factor in favor of the company being overvalued.. For example, EV / EBITDA in Modern, which many consider overrated, equal to 38.1.
- Net debt is negative - there is more money in the accounts, than debt obligations, and the time of their repayment will come only in 2024.
- EBITDA / Interest = 8,5. The operating profit of the company is more than enough to service the debt.
Drivers of further capitalization growth
The increase in the number of mental diseases due to the pandemic. Tardive dyskinesia occurs as a side effect of their treatment. Consequently, there is currently pent-up demand for Ingrezza, which is implemented in the future.
Versatility of developments. Ingrezza's premier bestselling active ingredient is in Phase III clinical trials for three other conditions.. Development costs already incurred, and the prospects for generating new sources of income through the use of the drug for the treatment of other diseases are still ahead.
Current stages of development. Almost half of the developments are already at the last stage of testing, which significantly increases the likelihood of success of final drug approval.
Duration of patents. Ingrezza's main revenue generator is securely protected by patents until at least 2029. The same can be said about the most promising development of Crinecerfont - the rights to it are secured until 2035. In the coming years, only collaborations with AbbVie and the least promising developments are subject to the risk of patent expiration..
Duration of Neurocrine Biosciences Patents
| Preparation | Expiration date of the composition of patents |
|---|---|
| Ingrezza | From 2029 until 2037 |
| Ongentys | From 2026 until 2035 |
| Orilissa | From 2021 until 2036 |
| Oriahnn | From 2021 until 2024 |
| Valbenazine | From 2029 until 2036 |
| Crinecerfont | 2035 year |
| Other developments | From 2021 until 2037 |
Expiration date of the composition of patents
What risks may there be
US Prescription Drug Price Reduction Act, which is actively promoted by US President Joseph Biden. Medicines in the US are expensive relative to many other developed countries., and a significant proportion of them are funded by the national Medicare program. Currently, drug manufacturers have a number of privileges, which they can lose. For example, the right to refuse the authorities to negotiate price reductions and complete freedom in the initial pricing of drugs.
What's the bottom line?
Despite a good financial situation, confident dynamics of financial indicators and a promising portfolio of developments, Neurocrine Biosciences is an above-average risk asset.
Although the company is an indirect beneficiary of the consequences of the pandemic, so far, the lion's share of its revenue comes from a single drug, and the likelihood of approval of further developments, although high, but still undefined.
