Regulatory And Competitive Pressures Will Diminish Future Prospects

Key Takeaways

• Heavy dependence on INGREZZA and CRENESSITY exposes the company to regulatory, reimbursement, and competition risks that could threaten revenue growth and margins.
  
• Intensifying competition, payer consolidation, and potential R&D setbacks may erode market share, pricing power, and future earnings.
  
• Diversified pipeline, strong commercial execution, and expanding market access position Neurocrine for enduring growth and reduced risk from dependence on individual products.

Catalysts

Neurocrine Biosciences, Inc. discovers, develops, and markets pharmaceuticals for neurological, neuroendocrine, and neuropsychiatric disorders in the United States and internationally.

• Neurocrine’s reliance on the continued strong growth of INGREZZA exposes it to heightened risk from any future regulatory changes, generic entries, or negative reimbursement decisions, particularly as global scrutiny on drug pricing and reimbursement tightens, which could sharply compress revenue and margin expansion in the coming years.
  
• The anticipated acceleration of new patient additions and increased Medicare Part D formulary coverage may prove unsustainable if demographic shifts, such as stagnating population growth and increased competition from non-pharmaceutical interventions, ultimately reduce the addressable patient pool and erode long-term top-line growth projections.
  
• As payers and providers consolidate, their bargaining power is likely to drive down realized net pricing for both INGREZZA and CRENESSITY, while mandatory contracting initiatives and evolving reimbursement dynamics (such as those triggered by the Inflation Reduction Act) directly threaten net revenue per prescription and overall earnings.
  
• Greater industry focus on mental health is driving a large influx of both major pharma and emerging biotech competitors into neurology and psychiatry, increasing the likelihood that Neurocrine’s market share, pricing power, and long-term revenue growth will deteriorate, especially if pipeline programs experience delays or clinical setbacks.
  
• The heavy investment in expanding the R&D pipeline heightens the risk of unproductive spend should late-stage assets fail in registration studies or encounter elevated regulatory hurdles—an outcome that would significantly depress future earnings and return on invested capital while locking in higher fixed costs.

Neurocrine Biosciences Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Neurocrine Biosciences compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Neurocrine Biosciences's revenue will grow by 8.7% annually over the next 3 years.
• The bearish analysts assume that profit margins will shrink from 12.7% today to 12.4% in 3 years time.
• The bearish analysts expect earnings to reach $384.0 million (and earnings per share of $3.6) by about May 2028, up from $305.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 34.8x on those 2028 earnings, down from 38.5x today. This future PE is greater than the current PE for the US Biotechs industry at 18.3x.
• Analysts expect the number of shares outstanding to decline by 1.66% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.21%, as per the Simply Wall St company report.

Neurocrine Biosciences Future Earnings Per Share Growth

Risks

• Neurocrine Biosciences is diversifying its revenue streams, with a robust late-stage pipeline and early commercial traction from CRENESSITY adding to its established blockbuster INGREZZA, which could support significant future revenue and earnings growth if these new assets perform well.
  
• Long-term secular trends, including the aging population and rising awareness and diagnosis of neurological and psychiatric disorders, are expanding the addressable market for Neurocrine’s products, which could drive sustained top-line revenue growth and market share gains.
  
• The company is executing sales force expansions and strategic marketing initiatives that have already led to record new patient starts for INGREZZA eight years after launch, showing durable demand and persistent growth potential, supporting resilience of revenues and net margins.
  
• Substantial progress in R&D, including the advancement of multiple Phase III clinical programs in major depressive disorder and schizophrenia, positions Neurocrine to potentially introduce new high-value therapies in large CNS indications, which could meaningfully boost long-term earnings and diversify risk away from overreliance on a single product.
  
• Expanded formulary coverage, particularly in Medicare Part D, and increasing reimbursement rates for new products like CRENESSITY, are improving patient access and could accelerate market penetration, further supporting revenue growth and earnings stability over the longer term.

Valuation

• The assumed bearish price target for Neurocrine Biosciences is $118.58, which represents two standard deviations below the consensus price target of $159.44. This valuation is based on what can be assumed as the expectations of Neurocrine Biosciences's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $192.0, and the most bearish reporting a price target of just $115.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $3.1 billion, earnings will come to $384.0 million, and it would be trading on a PE ratio of 34.8x, assuming you use a discount rate of 6.2%.
  
• Given the current share price of $118.92, the bearish analyst price target of $118.58 is 0.3% lower. The relatively low difference between the current share price and the analyst bearish price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.