Neurocrine Biosciences, Inc.

NBIX Details

Neurocrine Biosciences, Inc. (NASDAQ: NBIX) is a biopharmaceutical company focused on research, development, and commercialization of chemical entities to treat diseases associated with neurological, endocrine, and psychiatric disorders. The company’s commercial product portfolio includes INGREZZA (valbenazine), ONGENTYS (opicapone), ORILISSA (elagolix), and ORIAHNN (elagolix, estradiol, and norethindrone acetate). The company operates in a single segment of ‘Product sales.’ As of May 19, 2021, its market capitalization stood at USD 8.86 billion.

NBIX Program Pipeline (Source: Company Presentation, May 05, 2021)

Collaboration with Sentia Medical Sciences, Inc.: On April 26, 2021, Sentia Medical Sciences announced its research collaboration with the company to utilize NBIX’s drug development capability for manufacturing the medicines to treat hypothalamic-pituitary-adrenal (HPA) axis modulated diseases. As per the contract, both companies will first work together to discover novel peptide antagonists and advance them to the development candidate stage. After that, NBIX will be solely responsible for further development, manufacturing, regulatory, and commercial activities.

Q1FY21 Results: The company reported a 0.21% decline in total revenue to USD 236.60 million in Q1FY21 (ending March 31, 2021) compared to USD 237.10 million in Q1FY20 (ending March 31, 2020), primarily due to the lower refill rate per patient driven by seasonal payor dynamics for INGREZZA that were aggravated by Covid. The operating income of the company decreased by 46.51% to USD 31.5 million in Q1FY21 compared to USD 58.90 million in Q1FY20, due to a 22.55% increase in Research and Development expenses. The company reported a slight decrease in net income to USD 32.10 million in Q1FY21 compared to USD 37.40 million in Q1FY20.

Key Risks: Many of the company’s products are in various stages of Research and Development (R&D) and are prone to the risks of failure inherent in drug, diagnostic, and medical device product development. The products further run the risk of being ineffective or unreliable or failing to receive regulatory approval. Also, INGREZZA constitutes much of the company’s topline as well as earnings, thus exposing it to product concentration risk.

FY21 Guidance (Source: company presentation, May 05, 2021)

Outlook: The company has revised its FY21 expense guidance. NBIX is expecting combined R&D and SG&A expenses to be in the range of USD 855 million to USD 905 million on a GAAP basis. Further, it expects a pickup in INGREZZA's growth momentum as the impact of the pandemic tapers off.

Valuation Methodology: EV / Sales Multiple Based Relative Valuation

(Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

NBIX Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Stock Recommendation: NBIX stock price has decreased by 19.89% in the past three months and is currently leaning towards the lower band of the 52-week range of USD 86.02 to USD 136.26. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 106.51. Considering the significant correction in the stock price in the past one months, solid track record, strong product pipeline, and growth potential, we recommend a “BUY” rating on the stock at the closing price of USD 92.35, down by 1.56% as of May 19, 2021.