Wednesday, April 12, 2017

Backing Up the Truck on NBIX below $50

update 4/12/2015 - added a quick sentence about Mitsubishi Tanabe agreement and minor formatting edits.

Notes on NBIX (Neurocrine Biosciences)

INGREZZA for Tardive Dyskinesia got approved after market.  Stock jumped from low 40's to almost $50 after market.

I kept buying after market. Literally bought until Interactive Brokers wont let me by anymore.

The big surprise is the approval came with clean label. I had anticipated 50/50 chance of FDA approval, but most likely with some sort of black box warning. More upside surprises (for me): management decline to give price guidance, but pointed out that even the high end of their $20-60k estimated annual price range will be well below Teva's rival drug Austedo (which comes with black box warning).

That's a game changer. Market share and pricing assumptions that people used a week ago will likely prove conservative.


  • INGREZZA for Tardive Dyskinesia (TD) - worth $40-60
    • US only peak sales - $1.5-$2bn, use 2-3x EV/revenue.  Get you to roughly $40-$60
    • That's just US.  
  • Elagolix for Endometriosis - 800mm-1bn peak sales, assume NBIX takes 20% royalty get you $150mm ballpark revenue. This is an NDA filing 3Q17, which has about 85% probability of success.  works out to $3-4/share.  
  • Opicapone - 150mm peak sales, NBIX takes 63%, 2x EV/revenue.  thats another $2/share

This gets to $45/share floor price already. Could be $65

What am I not counting?

1) Not counting 300mm of cash - I just assume they'll be burned near term for development and bridging to commercialization.

2) They have an agreement with Mitsubishi Tanabe Pharma to commercialize INGREZZA for TD in Japan & Asia. I'm assigned 0 value for now but it's certainly something.

3) Elagolix for Uterine Fibroids  - this is in Phase 3, which empirically have 55-65% probability of success. This is a bigger market than Elagolix for Endometriosis. Could be $2-5/share. 

4) and finally, the big one:

INGREZZA for Tourette Syndrome (TS), in Phase 2.  This is a bigger market than TD!.  If Ingrezza for TD is worth $40 conservatively, then TS indication could be worth $50/share.  That could doubles the stock price right there.

At anything < $50/share there's zero or very limited downside.  You're getting a free option on INGREZZA for TS - 100% upside. The Phase 2 results come out for that next month. 

Other Notes

CEO is loaded with stocks. This is an R&D focused company. Management team is full of PhD and MD's with decades of industry experience.

Obvious acquisition target with attractive pipeline/assets/catalysts. Great R&D capability, But I'm not sure they're willing to sell. NBIX is building out its sales force/commercialization capabilities. We could see them transform from a small biotech to the next great pharma.

There's almost 4mm shares short interest and those will get squeezed.

No comments:

Post a Comment